Medicare Program; Inpatient Psychiatric Facilities Prospective Payment System Payment Update for Rate Year Beginning July 1, 2008 (RY 2009), 25709-25749 [08-1213]
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Federal Register / Vol. 73, No. 89 / Wednesday, May 7, 2008 / Notices
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Centers for Medicare & Medicaid
Services
[CMS–1401–N]
RIN 0938–AO92
Medicare Program; Inpatient
Psychiatric Facilities Prospective
Payment System Payment Update for
Rate Year Beginning July 1, 2008 (RY
2009)
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Notice.
AGENCY:
SUMMARY: This notice updates the
prospective payment rates for Medicare
inpatient psychiatric hospital services
provided by inpatient psychiatric
facilities (IPFs). These changes are
applicable to IPF discharges occurring
during the rate year beginning July 1,
2008 through June 30, 2009.
DATES: Effective Date: The updated IPF
prospective payment rates are effective
for discharges occurring on or after July
1, 2008 through June 30, 2009.
FOR FURTHER INFORMATION CONTACT:
Dorothy Myrick or Jana Lindquist, (410)
786–4533 (for general information).
Heidi Oumarou, (410) 786–7942 (for
information regarding the market
basket and labor-related share).
Theresa Bean, (410) 786–2287 (for
information regarding the regulatory
impact analysis).
Matthew Quarrick, (410) 786–9867 (for
information on the wage index).
SUPPLEMENTARY INFORMATION:
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Table of Contents
To assist readers in referencing
sections contained in this document, we
are providing the following table of
contents.
I. Background.
A. Annual Requirements for Updating the
IPF PPS.
B. Overview of the Legislative
Requirements of the IPF PPS.
C. IPF PPS-General Overview.
II. Transition Period for Implementation of
the IPF PPS.
III. Updates to the IPF PPS for RY Beginning
July 1, 2008.
A. Determining the Standardized BudgetNeutral Federal Per Diem Base Rate.
1. Standardization of the Federal Per Diem
Base Rate and Electroconvulsive Therapy
Rate.
2. Calculation of the Budget Neutrality
Adjustment.
a. Outlier Adjustment.
b. Stop-Loss Provision Adjustment.
c. Behavioral Offset.
B. Update of the Federal Per Diem Base
Rate and Electroconvulsive Therapy
Rate.
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1. Market Basket for IPFs Reimbursed
Under the IPF PPS.
a. Market Basket Index for the IPF PPS.
b. Overview of the RPL Market Basket.
2. Labor-Related Share.
3. IPFs Paid Based on a Blend of the
Reasonable Cost-based Payments.
IV. Update of the IPF PPS Adjustment
Factors.
A. Overview of the IPF PPS Adjustment
Factors.
B. Patient-Level Adjustments.
1. Adjustment for MS–DRG Assignment.
2. Payment for Comorbid Conditions.
3. Patient Age Adjustments.
4. Variable Per Diem Adjustments.
C. Facility-Level Adjustments.
1. Wage Index Adjustment.
a. Clarification of New England Deemed
Counties.
b. Multi-campus-Wage Index Data
Collection.
c. OMB Bulletins.
2. Adjustment for Rural Location.
3. Teaching Adjustment.
4. Cost of Living Adjustment for IPFs
Located in Alaska and Hawaii.
5. Adjustment for IPFs With a Qualifying
Emergency Department (ED).
D. Other Payment Adjustments and
Policies.
1. Outlier Payments.
a. Update to the Outlier Fixed Dollar Loss
Threshold Amount.
b. Statistical Accuracy of Cost-to-Charge
Ratios.
2. Stop-Loss Provision.
V. Waiver of Proposed Rulemaking.
VI. Collection of Information Requirements.
VII. Regulatory Impact Analysis.
Addenda.
Acronyms
Because of the many terms to which
we refer by acronym in this notice, we
are listing the acronyms used and their
corresponding terms in alphabetical
order below:
BBRA Medicare, Medicaid and SCHIP
[State Children’s Health Insurance
Program] Balanced Budget
Refinement Act of 1999, (Pub. L. 106–
113).
CBSA Core-Based Statistical Area.
CCR Cost-to-charge ratio.
CMSA Consolidated Metropolitan
Statistical Area.
DSM–IV–TR Diagnostic and Statistical
Manual of Mental Disorders Fourth
Edition—Text Revision.
DRGs Diagnosis-related groups.
FY Federal fiscal year.
ICD–9–CM International Classification
of Diseases, 9th Revision, Clinical
Modification.
IPFs Inpatient psychiatric facilities.
IRFs Inpatient rehabilitation facilities.
LTCHs Long-term care hospitals.
MedPAR Medicare provider analysis
and review file.
MSA Metropolitan Statistical Area.
RY Rate Year.
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25709
TEFRA Tax Equity and Fiscal
Responsibility Act of 1982, (Pub. L.
97–248).
I. Background
A. Annual Requirements for Updating
the IPF PPS
In November 2004, we implemented
the IPF PPS in a final rule that appeared
in the November 15, 2004 Federal
Register (69 FR 66922). In developing
the IPF PPS, in order to ensure that the
IPF PPS is able to account adequately
for each IPF’s case-mix, we performed
an extensive regression analysis of the
relationship between the per diem costs
and certain patient and facility
characteristics to determine those
characteristics associated with
statistically significant cost differences
on a per diem basis. For characteristics
with statistically significant cost
differences, we used the regression
coefficients of those variables to
determine the size of the corresponding
payment adjustments.
In that final rule, we explained that
we believe it is important to delay
updating the adjustment factors derived
from the regression analysis until we
have IPF PPS data that includes as
much information as possible regarding
the patient-level characteristics of the
population that each IPF serves.
Therefore, we indicated that we did not
intend to update the regression analysis
and recalculate the Federal per diem
base rate and the patient- and facilitylevel adjustments until we complete
that analysis. Until that analysis is
complete, we stated our intention to
publish a notice in the Federal Register
each spring to update the IPF PPS (71
FR 27041).
Updates to the IPF PPS as specified in
42 CFR 412.428 include the following:
• A description of the methodology
and data used to calculate the updated
Federal per diem base payment amount.
• The rate of increase factor as
described in § 412.424(a)(2)(iii), which
is based on the excluded hospital with
capital market basket under the update
methodology of section 1886(b)(3)(B)(ii)
of the Act for each year.
• For discharges occurring on or after
July 1, 2006, the rate of increase factor
for the Federal portion of the IPF’s
payment, which is based on the
rehabilitation, psychiatric, and longterm care (RPL) market basket.
• For discharges occurring on or after
October 1, 2005, the rate of increase
factor for the reasonable cost portion of
the IPF’s payment, which is based on
the 2002-based excluded hospital
market basket.
• The best available hospital wage
index and information regarding
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whether an adjustment to the Federal
per diem base rate, is needed to
maintain budget neutrality.
• Updates to the fixed dollar loss
threshold amount in order to maintain
the appropriate outlier percentage.
• Description of the ICD–9–CM
coding and DRG classification changes
discussed in the annual update to the
hospital inpatient prospective payment
system (IPPS) regulations.
• Update to the electroconvulsive
therapy (ECT) payment by a factor
specified by CMS.
• Update to the national urban and
rural cost-to-charge ratio medians and
ceilings.
• Update to the cost of living
adjustment factors for IPFs located in
Alaska and Hawaii, if appropriate.
Our most recent annual update
occurred in the May 2007 IPF PPS
notice (72 FR 25602) that set forth
updates to the IPF PPS payment rates
for RY 2008.
This notice does not initiate any
policy changes with regard to the IPF
PPS; rather, it simply provides an
update to the rates for RY 2009 (that is,
the prospective payment rates
applicable for discharges beginning July
1, 2008 through June 30, 2009). In
establishing these payment rates, we
update the IPF per diem payment rates
that were published in the May 2007
IPF PPS notice in accordance with our
established policies.
B. Overview of the Legislative
Requirements for the IPF PPS
Section 124 of the Medicare,
Medicaid, and SCHIP (State Children’s
Health Insurance Program) Balanced
Budget Refinement Act of 1999, (Pub. L.
106–113) (BBRA) required
implementation of the IPF PPS.
Specifically, section 124 of the BBRA
mandated that the Secretary develop a
per diem PPS for inpatient hospital
services furnished in psychiatric
hospitals and psychiatric units that
includes an adequate patient
classification system that reflects the
differences in patient resource use and
costs among psychiatric hospitals and
psychiatric units.
Section 405(g)(2) of the Medicare
Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub.
L. 108–173) extended the IPF PPS to
distinct part psychiatric units of critical
access hospitals (CAHs).
To implement these provisions, we
published various proposed and final
rules in the Federal Register. For more
information regarding these rules, see
the CMS Web sites https://
www.cms.hhs.gov/
InpatientPsychFacilPPS/ and https://
www.cms.hhs.gov/
InpatientpsychfacilPPS/
02_regulations.asp.
C. IPF PPS—General Overview
The November 2004 IPF PPS final
rule (69 FR 66922) established the IPF
PPS, as authorized under section 124 of
the BBRA and codified at subpart N of
part 412 of the Medicare regulations.
The November 2004 IPF PPS final rule
set forth the per diem Federal rates for
the implementation year (that is, the 18month period from January 1, 2005
through June 30, 2006) that provided
payment for the inpatient operating and
capital costs to IPFs for covered
psychiatric services they furnish (that is,
routine, ancillary, and capital costs), but
not costs of approved educational
activities, bad debts, and other services
or items that are outside the scope of the
IPF PPS. Covered psychiatric services
include services for which benefits are
provided under the fee-for-service Part
A (Hospital Insurance Program)
Medicare program.
The IPF PPS established the Federal
per diem base rate for each patient day
in an IPF derived from the national
average daily routine operating,
ancillary, and capital costs in IPFs in FY
2002. The average per diem cost was
updated to the midpoint of the first year
under the IPF PPS, standardized to
account for the overall positive effects of
the IPF PPS payment adjustments, and
adjusted for budget neutrality.
The Federal per diem payment under
the IPF PPS is comprised of the Federal
per diem base rate described above and
certain patient- and facility-level
payment adjustments that were found in
the regression analysis to be associated
with statistically significant per diem
cost differences.
The patient-level adjustments include
age, DRG assignment, comorbidities,
and variable per diem adjustments to
reflect higher per diem costs in the early
days of an IPF stay. Facility-level
adjustments include adjustments for the
IPF’s wage index, rural location,
teaching status, a cost of living
adjustment for IPFs located in Alaska
and Hawaii, and presence of a
qualifying emergency department (ED).
The IPF PPS provides additional
payments for: Outlier cases; stop-loss
protection (which is applicable only
during the IPF PPS transition period);
interrupted stays; and a per treatment
adjustment for patients who undergo
ECT.
A complete discussion of the
regression analysis appears in the
November 2004 IPF PPS final rule (69
FR 66933 through 66936).
Section 124 of BBRA does not specify
an annual update rate strategy for the
IPF PPS and is broadly written to give
the Secretary discretion in establishing
an update methodology. Therefore, in
the November 2004 IPF PPS final rule
(69 FR 66966), we implemented the IPF
PPS using the following update
strategy—(1) calculate the final Federal
per diem base rate to be budget neutral
for the 18-month period of January 1,
2005 through June 30, 2006; (2) use a
July 1 through June 30 annual update
cycle; and (3) allow the IPF PPS first
update to be effective for discharges on
or after July 1, 2006 through June 30,
2007.
II. Transition Period for
Implementation of the IPF PPS
In the November 2004 IPF PPS final
rule, we established § 412.426 to
provide for a 3-year transition period
from reasonable cost-based
reimbursement to full prospective
payment for IPFs. The purpose of the
transition period is to allow existing
IPFs time to adjust their cost structures
and to integrate the effects of changing
to the IPF PPS.
New IPFs, as defined in § 412.426(c),
are paid 100 percent of the Federal per
diem payment amount. For those IPFs
that are transitioning to the new system,
payment is based on an increasing
percentage of the PPS payment and a
decreasing percentage of each IPF’s
facility-specific Tax Equity and Fiscal
Responsibility Act of 1982 (TEFRA)
reimbursement rate.
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TABLE 1.—IPF PPS TRANSITION BLEND FACTORS
Transition Year
Cost reporting periods
beginning on or after
1 ....................................................................................
2 ....................................................................................
3 ....................................................................................
January 1, 2005 ............................................................
January 1, 2006 ............................................................
January 1, 2007 ............................................................
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TEFRA rate
percentage
07MYN1
75
50
25
IPF PPS
federal rate
percentage
25
50
75
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TABLE 1.—IPF PPS TRANSITION BLEND FACTORS—Continued
Cost reporting periods
beginning on or after
Transition Year
January 1, 2008 ............................................................
Changes to the blend percentages
occur at the beginning of an IPF’s cost
reporting period. However, regardless of
when an IPF’s cost reporting year
begins, the payment update will be
effective for discharges occurring on or
after July 1, 2008 through June 30, 2009.
IPFs with cost reporting periods
beginning January 1, 2008 will have
completed the transition period and will
receive 100 percent IPF PPS payments.
Other IPFs with cost reporting periods
beginning after January 1, 2008, during
2008, will also begin to receive 100
percent IPF PPS payments. This means
that beginning January 1, 2009, all IPFs
will receive 100 percent IPF PPS
payments and the IPF PPS transition
period will have ended.
For RY 2009, the transition period
established in the November 2004 IPF
PPS final rule will no longer be applied.
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III. Updates to the IPF PPS for RY
Beginning July 1, 2008
The Federal per diem base rate is used
as the standard payment per day under
the IPF PPS and is adjusted by the
applicable wage index factor and the
patient- and facility-level adjustments
that are applicable to the IPF stay. A
detailed explanation of how we
calculated the average per diem cost
appears in the November 2004 IPF PPS
final rule (69 FR 66926).
A. Determining the Standardized
Budget-Neutral Federal Per Diem Base
Rate
Section 124(a)(1) of the BBRA
requires that we implement the IPF PPS
in a budget neutral manner. In other
words, the amount of total payments
under the IPF PPS, including any
payment adjustments, must be projected
to be equal to the amount of total
payments that would have been made if
the IPF PPS were not implemented.
Therefore, we calculated the budgetneutrality factor by setting the total
estimated IPF PPS payments to be equal
to the total estimated payments that
would have been made under the
TEFRA methodology had the IPF PPS
not been implemented.
Under the IPF PPS methodology, we
calculated the final Federal per diem
base rate to be budget neutral during the
IPF PPS implementation period (that is,
the 18-month period from January 1,
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2005 through June 30, 2006) using a July
1 update cycle. We updated the average
cost per day to the midpoint of the IPF
PPS implementation period (that is,
October 1, 2005), and this amount was
used in the payment model to establish
the budget-neutrality adjustment.
A step-by-step description of the
methodology used to estimate payments
under the TEFRA payment system
appears in the November 2004 IPF PPS
final rule (69 FR 66926).
1. Standardization of the Federal Per
Diem Base Rate and Electroconvulsive
Therapy Rate
In the November 2004 IPF PPS final
rule, we describe how we standardized
the IPF PPS Federal per diem base rate
in order to account for the overall
positive effects of the IPF PPS payment
adjustment factors. To standardize the
IPF PPS payments, we compared the IPF
PPS payment amounts calculated from
the FY 2002 Medicare Provider Analysis
and Review (MedPAR) file to the
projected TEFRA payments from the FY
2002 cost report file updated to the
midpoint of the IPF PPS
implementation period (that is, October
2005). The standardization factor was
calculated by dividing total estimated
payments under the TEFRA payment
system by estimated payments under
the IPF PPS. The standardization factor
was calculated to be 0.8367.
As described in detail in the May
2006 IPF PPS final rule (71 FR 27045),
in reviewing the methodology used to
simulate the IPF PPS payments used for
the November 2004 IPF PPS final rule,
we discovered that due to a computer
code error, total IPF PPS payments were
underestimated by about 1.36 percent.
Since the IPF PPS payment total should
have been larger than the estimated
figure, the standardization factor should
have been smaller (0.8254 vs. 0.8367). In
turn, the Federal per diem base rate and
the ECT rate should have been reduced
by 0.8254 instead of 0.8367.
To resolve this issue, in RY 2007, we
amended the Federal per diem base rate
and the ECT payment rate
prospectively. Using the standardization
factor of 0.8254, the average cost per day
was effectively reduced by 17.46
percent (100 percent minus 82.54
percent = 17.46 percent).
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IPF PPS
federal rate
percentage
TEFRA rate
percentage
0
100
2. Calculation of the Budget Neutrality
Adjustment
To compute the budget neutrality
adjustment for the IPF PPS, we
separately identified each component of
the adjustment, that is, the outlier
adjustment, stop-loss adjustment, and
behavioral offset.
A complete discussion of how we
calculate each component of the budget
neutrality adjustment appears in the
November 2004 IPF PPS final rule (69
FR 66932 through 66933) and in the
May 2006 IPF PPS final rule (71 FR
27044 through 27046).
a. Outlier Adjustment
Since the IPF PPS payment amount
for each IPF includes applicable outlier
amounts, we reduced the standardized
Federal per diem base rate to account
for aggregate IPF PPS payments
estimated to be made as outlier
payments. The outlier adjustment was
calculated to be 2 percent. As a result,
the standardized Federal per diem base
rate was reduced by 2 percent to
account for projected outlier payments.
b. Stop-Loss Provision Adjustment
As explained in the November 2004
IPF PPS final rule, we provided a stoploss payment during the transition from
cost-based reimbursement to the per
diem payment system to ensure that an
IPF’s total PPS payments were no less
than a minimum percentage of their
TEFRA payment, had the IPF PPS not
been implemented. We reduced the
standardized Federal per diem base rate
by the percentage of aggregate IPF PPS
payments estimated to be made for stoploss payments. As a result, the
standardized Federal per diem base rate
was reduced by 0.39 percent to account
for stop-loss payments. Since the
transition will be completed for RY
2009, for cost reporting periods
beginning on or after January 1, 2008,
IPFs will be paid 100 percent PPS and,
therefore, the stop loss provision will no
longer be applicable. We indicated in
the November 2004 IPF PPS final rule
that we would remove this 0.39 percent
adjustment to the Federal per diem base
rate after the transition (69 FR 66932).
Therefore, for RY 2009, the Federal per
diem base rate and ECT rates will be
increased by 0.39 percent.
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c. Behavioral Offset
As explained in the November 2004
IPF PPS final rule, implementation of
the IPF PPS may result in certain
changes in IPF practices especially with
respect to coding for comorbid medical
conditions. As a result, Medicare may
make higher payments than assumed in
our calculations. Accounting for these
effects through an adjustment is
commonly known as a behavioral offset.
Based on accepted actuarial practices
and consistent with the assumptions
made in other PPSs, we assumed in
determining the behavioral offset that
IPFs would regain 15 percent of
potential ‘‘losses’’ and augment
payment increases by 5 percent. We
applied this actuarial assumption,
which is based on our historical
experience with new payment systems,
to the estimated ‘‘losses’’ and ‘‘gains’’
among the IPFs. The behavioral offset
for the IPF PPS was calculated to be
2.66 percent. As a result, we reduced
the standardized Federal per diem base
rate by 2.66 percent to account for
behavioral changes. As indicated in the
November 2004 IPF PPS final rule, we
do not plan to change adjustment factors
or projections, including the behavioral
offset, until we analyze IPF PPS data. At
that time, we will re-assess the accuracy
of the behavioral offset along with the
other factors impacting budget
neutrality.
If we find that an adjustment is
warranted, the percent difference may
be applied prospectively to the
established PPS rates to ensure the rates
accurately reflect the payment level
intended by the statute. In conducting
this analysis, we will be interested in
the extent to which improved
documentation and coding of patients’
principal and other diagnoses, which
may not reflect real increases in
underlying resource demands, has
occurred under the PPS.
B. Update of the Federal Per Diem Base
Rate and Electroconvulsive Therapy
Rate
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1. Market Basket for IPFs Reimbursed
Under the IPF PPS
As described in the November 2004
IPF PPS final rule, the average per diem
cost was updated to the midpoint of the
implementation year (69 FR 66931).
This updated average per diem cost of
$724.43 was reduced by 17.46 percent
to account for standardization to
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projected TEFRA payments for the
implementation period, by 2 percent to
account for outlier payments, by 0.39
percent to account for stop-loss
payments, and by 2.66 percent to
account for the behavioral offset. The
Federal per diem base rate in the
implementation year was $575.95, the
per diem base rate for RY 2007 was
$595.09, and the per diem base rate for
RY 2008 was $614.99.
Applying the market basket increase
of 3.2 percent, the stop-loss adjustment
of 0.39 percent, and the wage index
budget neutrality factor of 1.0010 yields
a Federal per diem base rate of $637.78
for RY 2009. Similarly, applying the
market basket increase, stop-loss
adjustment, and wage index budget
neutrality factor to the RY 2008 ECT rate
yields an ECT rate of $274.58 for RY
2009.
a. Market Basket Index for the IPF PPS
The market basket index that was
used to develop the IPF PPS was the
excluded hospital with capital market
basket. The market basket was based on
1997 Medicare cost report data and
included data for Medicare participating
IPFs, inpatient rehabilitation facilities
(IRFs), long-term care hospitals
(LTCHs), cancer, and children’s
hospitals.
We are presently unable to create a
separate market basket specifically for
psychiatric hospitals due to the
following two reasons: (1) There is a
very small sample size for free-standing
psychiatric facilities; and (2) there are
limited expense data for some categories
on the free-standing psychiatric cost
reports (for example, approximately 4
percent of free-standing psychiatric
facilities reported contract labor cost
data for FY 2002). However, since all
IRFs, LTCHs, and IPFs are now paid
under a PPS, we are updating PPS
payments made under the IRF PPS, the
IPF PPS, and the LTCH PPS, using a
market basket reflecting the operating
and capital cost structures for IRFs,
IPFs, and LTCHs (hereafter referred to as
the rehabilitation, psychiatric, long-term
care (RPL) market basket).
We have excluded cancer and
children’s hospitals from the RPL
market basket because their payments
are based entirely on reasonable costs
subject to rate-of-increase limits
established under the authority of
section 1886(b) of the Act, which are
implemented in regulations at § 413.40.
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They are not reimbursed under a PPS.
Also, the FY 2002 cost structures for
cancer and children’s hospitals are
noticeably different than the cost
structures of the IRFs, IPFs, and LTCHs.
The services offered in IRFs, IPFs, and
LTCHs are typically more laborintensive than those offered in cancer
and children’s hospitals. Therefore, the
compensation cost weights for IRFs,
IPFs, and LTCHs are larger than those in
cancer and children’s hospitals. In
addition, the depreciation cost weights
for IRFs, IPFs, and LTCHs are noticeably
smaller than those for cancer and
children’s hospitals.
A complete discussion of the RPL
market basket appears in the May 2006
IPF PPS final rule (71 FR 27046 through
27054).
b. Overview of the RPL Market Basket
The RPL market basket is a fixed
weight, Laspeyres-type price index. A
market basket is described as a fixedweight index because it answers the
question of how much it would cost, at
another time, to purchase the same mix
of goods and services purchased to
provide hospital services in a base
period. The effects on total expenditures
resulting from changes in the quantity
or mix of goods and services (intensity)
purchased subsequent to the base period
are not measured. In this manner, the
market basket measures only pure price
change. Only when the index is rebased
would the quantity and intensity effects
be captured in the cost weights.
Therefore, we rebase the market basket
periodically so that cost weights reflect
changes in the mix of goods and
services that hospitals purchase
(hospital inputs) to furnish patient care
between base periods.
The terms rebasing and revising,
while often used interchangeably,
actually denote different activities.
Rebasing means moving the base year
for the structure of costs of an input
price index (for example, shifting the
base year cost structure from FY 1997 to
FY 2002). Revising means changing data
sources, methodology, or price proxies
used in the input price index. In 2006,
we rebased and revised the market
basket used to update the IPF PPS.
Table 2 below sets forth the completed
FY 2002-based RPL market basket
including the cost categories, weights,
and price proxies.
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25713
TABLE 2.—FY 2002-BASED RPL MARKET BASKET COST CATEGORIES, WEIGHTS, AND PROXIES
FY 2002-based
RPL market
basket cost
weight
Expense categories
TOTAL ......................................................................................
Compensation ...........................................................................
Wages and Salaries * ........................................................
Employee Benefits * ..........................................................
Professional Fees, Non-Medical 1A* .......................................
Utilities ......................................................................................
Electricity ...........................................................................
Fuel Oil, Coal, etc. ............................................................
Water and Sewage ............................................................
Professional Liability Insurance ................................................
All Other Products and Services
All Other Products
Pharmaceuticals .........................................................
Food: Direct Purchases .............................................
Food: Contract Service ..............................................
Chemicals ...................................................................
Medical Instruments ...................................................
Photographic Supplies ...............................................
Rubber and Plastics ...................................................
Paper Products ..........................................................
Apparel .......................................................................
Machinery and Equipment .........................................
Miscellaneous Products ** ..........................................
All Other Services
Telephone ..................................................................
Postage ......................................................................
All Other: Labor Intensive * ........................................
All Other: Non-labor Intensive ....................................
Capital-Related Costs ***
Depreciation
Fixed Assets ...............................................................
Movable Equipment ...................................................
Interest Costs
Nonprofit ............................................................................
100.000
65.877
52.895
12.982
2.892
0.656
0.351
0.108
0.197
1.161
19.265
13.323
5.103
0.873
0.620
1.100
1.014
0.096
1.052
1.000
0.207
0.297
1.963
5.942
0.240
0.682
2.219
2.800
10.149
6.186
4.250
1.937
2.775
2.081
For Profit ............................................................................
0.694
Other Capital-Related Costs ....................................................
1.187
FY 2002-based RPL market basket price proxies
ECI-Wages and Salaries, Civilian Hospital Workers.
ECI-Benefits, Civilian Hospital Workers.
ECI-Compensation for Professional & Related occupations.
PPI-Commercial Electric Power.
PPI-Commercial Natural Gas.
CPI–U—Water & Sewage Maintenance.
CMS Professional Liability Premium Index.
PPI Prescription Drugs.
PPI Processed Foods & Feeds.
CPI–U Food Away From Home.
PPI Industrial Chemicals.
PPI Medical Instruments & Equipment.
PPI Photographic Supplies.
PPI Rubber & Plastic Products.
PPI Converted Paper & Paperboard Products.
PPI Apparel.
PPI Machinery & Equipment.
PPI Finished Goods less Food & Energy.
CPI–U Telephone Services.
CPI–U Postage.
ECI-Compensation for Private Service Occupations.
CPI–U All Items.
Boeckh Institutional Construction 23-year useful life.
WPI Machinery & Equipment 11-year useful life.
Average yield on domestic municipal bonds (Bond Buyer 20
bonds) vintage-weighted (23 years).
Average yield on Moody’s Aaa bond vintage-weighted (23
years).
CPI–U Residential Rent.
sroberts on PROD1PC70 with NOTICES
* Labor-related.
** Blood and blood-related products is included in miscellaneous products.
*** A portion of capital costs (0.46) are labor-related.
Note: Due to rounding, weights may not sum to total.
For RY 2009, we evaluated the price
proxies using the criteria of reliability,
timeliness, availability, and relevance.
Reliability indicates that the index is
based on valid statistical methods and
has low sampling variability. Timeliness
implies that the proxy is published
regularly, preferably at least once a
quarter. Availability means that the
proxy is publicly available. Finally,
relevance means that the proxy is
applicable and representative of the cost
category weight to which it is applied.
The Consumer Price Indexes (CPIs),
Producer Price Indexes (PPIs), and
Employment Cost Indexes (ECIs) used as
proxies in this market basket meet these
criteria.
We note that the proxies are the same
as those used for the FY 1997-based
excluded hospital with capital market
basket. Because these proxies meet our
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criteria of reliability, timeliness,
availability, and relevance, we believe
they continue to be the best measure of
price changes for the cost categories. For
further discussion on the FY 1997-based
excluded hospital with capital market
basket, see the August 1, 2002 IPPS final
rule (67 FR at 50042).
The RY 2009 (that is, beginning July
1, 2008) update for the IPF PPS using
the FY 2002-based RPL market basket
and Global Insight’s 1st quarter 2008
forecast for the market basket
components is 3.2 percent. This
includes increases in both the operating
section and the capital section for the
12-month RY period (that is, July 1,
2008 through June 30, 2009). Global
Insight, Inc. is a nationally recognized
economic and financial forecasting firm
that contracts with CMS to forecast the
components of the market baskets.
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2. Labor-Related Share
Due to the variations in costs and
geographic wage levels, we believe that
payment rates under the IPF PPS should
continue to be adjusted by a geographic
wage index. This wage index applies to
the labor-related portion of the Federal
per diem base rate, hereafter referred to
as the labor-related share.
The labor-related share is determined
by identifying the national average
proportion of operating costs that are
related to, influenced by, or vary with
the local labor market. Using our current
definition of labor-related, the laborrelated share is the sum of the relative
importance of wages and salaries, fringe
benefits, professional fees, laborintensive services, and a portion of the
capital share from an appropriate
market basket. We used the FY 2002based RPL market basket cost weights
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relative importance to determine the
labor-related share for the IPF PPS.
The labor-related share for RY 2009 is
the sum of the RY 2009 relative
importance of each labor-related cost
category, and reflects the different rates
of price change for these cost categories
between the base year (FY 2002) and RY
2009. The sum of the relative
importance for the RY 2009 operating
costs (wages and salaries, employee
benefits, professional fees, and laborintensive services) is 71.681, as shown
in Table 3 below. The portion of capital
that is influenced by the local labor
market is estimated to be 46 percent,
which is the same percentage used in
the FY 1997-based IRF and IPF payment
systems.
Since the relative importance for
capital is 8.586 percent of the FY 2002based RPL market basket in RY 2009, we
are taking 46 percent of 8.586 percent to
determine the labor-related share of
capital for RY 2009. The result is 3.950
percent, which we added to 71.681
percent for the operating cost amount to
determine the total labor-related share
for RY 2009. Thus, the labor-related
share that we are using for IPF PPS in
RY 2009 is 75.631 percent. Table 3
below shows the RY 2009 labor-related
share using the FY 2002-based RPL
market basket. We note that this laborrelated share is determined by using the
same methodology as employed in
calculating all previous IPF laborrelated shares.
A complete discussion of the IPF
labor-related share methodology appears
in the November 2004 IPF PPS final rule
(69 FR 66952 through 66954).
TABLE 3.—TOTAL LABOR-RELATED SHARE—RELATIVE IMPORTANCE FOR RY 2009
FY 2002-based
RPL Market
Basket Relative
Importance
(Percent)
RY 2008 *
FY 2002-based
RPL Market
Basket Relative
Importance
(Percent)
RY 2009 **
Wages and salaries .............................................................................................................................................
Employee benefits ...............................................................................................................................................
Professional fees .................................................................................................................................................
All other labor-intensive services .........................................................................................................................
SUBTOTAL ...................................................................................................................................................
52.588
14.127
2.907
2.145
71.767
52.645
14.004
2.895
2.137
71.681
Labor-related share of capital costs (0.46) .........................................................................................................
4.021
3.950
TOTAL ..........................................................................................................................................................
75.788
75.631
Cost category
* Based on 2007 1st Quarter forecast.
** Based on 2008 1st Quarter forecast.
3. IPFs Paid Based on a Blend of the
Reasonable Cost-Based Payments
As stated in the FY 2006 IPPS final
rule (70 FR 47399), for IPFs that are
transitioning to the fully Federal
prospective payment rate, we will
continue using the rebased and revised
FY 2002-based excluded hospital
market basket to update the reasonable
cost-based portion of their payments.
For RY 2009, all IPFs will have fully
transitioned to PPS payment and
therefore, be paid based on 100 percent
IPF PPS. The reasonable cost-based
payment which is subject to TEFRA
limits will no longer be applied.
IV. Update of the IPF PPS Adjustment
Factors
sroberts on PROD1PC70 with NOTICES
A. Overview of the IPF PPS Adjustment
Factors
The IPF PPS payment adjustments
were derived from a regression analysis
of 100 percent of the FY 2002 MedPAR
data file, which contained 483,038
cases. We used the same results of this
regression analysis to implement the
November 2004 and May 2006 IPF PPS
final rules. While we have since used
more recent claims data to set the fixed
dollar loss threshold amount, we use the
same results of this regression analysis
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to update the IPF PPS for RY 2008 as
well as RY 2009.
As previously stated, we do not plan
to update the regression analysis until
we analyze IPF PPS data. We plan to
monitor claims and payment data
independently from cost report data to
assess issues, or whether changes in
case-mix or payment shifts have
occurred between free standing
governmental, non-profit and private
psychiatric hospitals, and psychiatric
units of general hospitals, and other
issues of importance to psychiatric
facilities.
A complete discussion of the data file
used for the regression analysis appears
in the November 2004 IPF PPS final rule
(69 FR 66935 through 66936).
B. Patient-Level Adjustments
In the May 2006 IPF PPS final rule (71
FR 27040) for RY 2007 and in the May
2007 IPF PPS notice (72 FR 25602) for
RY 2008, we provided payment
adjustments for the following patientlevel characteristics: DRG assignment of
the patient’s principal diagnosis;
selected comorbidities; patient age; and
the variable per diem adjustments. As
previously stated in the November 2004
IPF PPS final rule, we do not intend to
update the adjustment factors derived
from the regression analysis until we
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analyze IPF PPS data that include as
much information as possible regarding
the patient-level characteristics of the
population that each IPF serves.
1. Adjustment for MS–DRG Assignment
The IPF PPS includes payment
adjustments for the psychiatric DRG
assigned to the claim based on each
patient’s principal diagnosis. In the May
4, 2007 IPF PPS update notice (72 FR
25602), we explained that the IPF PPS
includes 15 diagnosis-related group
(DRG) adjustment factors. The
adjustment factors were expressed
relative to the most frequently reported
psychiatric DRG in FY 2002, that is,
DRG 430 (psychoses). The coefficient
values and adjustment factors were
derived from the regression analysis.
In accordance with § 412.27(a),
payment under the IPF PPS is
conditioned on IPFs admitting ‘‘only
patients whose admission to the unit is
required for active treatment, of an
intensity that can be provided
appropriately only in an inpatient
hospital setting, of a psychiatric
principal diagnosis that is listed in the
Fourth Edition, Text Revision of the
American Psychiatric Association’s
Diagnostic and Statistical Manual,
(DSM–IV–TR) or in Chapter Five
(‘‘Mental Disorders’’) of the
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International Classification of Diseases,
Ninth Revision, Clinical Modification
[(ICD–9–CM)].’’ IPF claims with a
principal diagnosis included in Chapter
Five of the ICD–9–CM or the DSM–IV–
TR will be paid the Federal per diem
base rate under the IPF PPS, and all
other applicable adjustments, including
any applicable DRG adjustment.
Psychiatric principal diagnoses that do
not group to one of the 15 designated
DRGs still receive the Federal per diem
base rate and all other applicable
adjustments, but the payment would not
include a DRG adjustment.
The Standards for Electronic
Transaction final rule published in the
Federal Register on August 17, 2000 (65
FR 50312) adopted the ICD–9–CM as the
designated code set for reporting
diseases, injuries, impairments, other
health related problems, their
manifestations, and causes of injury,
disease, impairment, or other health
related problems. Therefore, we use the
ICD–9–CM as the designated code set
for the IPF PPS.
We believe that it is important to
maintain the same diagnostic coding
and DRG classification for IPFs that are
used under the IPPS for providing the
same psychiatric care. Therefore, when
the IPF PPS was implemented for cost
reporting periods beginning on or after
January 1, 2005, we adopted the same
diagnostic code set and DRG patient
classification system (that is, the CMS
DRGs) that was utilized at the time
under the hospital inpatient prospective
payment system (IPPS). Since the
inception of the IPF PPS, the DRGs used
as the patient classification system
under the IPF PPS have corresponded
exactly with the CMS DRGs applicable
under the IPPS for acute care hospitals.
Every year, changes to the ICD–9–CM
coding system are addressed in the IPPS
proposed and final rules. The changes to
the codes are effective October 1 of each
year and must be used by acute care
hospitals under the IPPS to report
diagnostic and procedure information.
The IPF PPS has always incorporated
those ICD–9–CM coding changes made
in the annual IPPS update. The IPF PPS
announces the changes in a change
request, at the same time the coding
changes to IPPS and LTCH PPS are
announced. Those ICD–9–CM coding
changes are also published in the next
IPF PPS RY update, in either the
proposed and final rules, or in an
update notice.
As part of CMS’ effort to better
recognize resource use and the severity
of illness among patients, CMS adopted
the new Medicare Severity diagnosis
related groups (MS–DRGs) for the IPPS
in the FY 2008 IPPS final rule with
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comment period (72 FR 47130). By
better accounting for patients’ severity
of illness in Medicare payment rates, the
MS–DRGs encourage hospitals to
improve their coding and
documentation of patient diagnoses.
The MS–DRGs, which are based on the
CMS DRGs, represent a significant
increase in the number of DRGs (from
538 to 745, an increase of 207). For a
full description of the development and
implementation of the MS–DRGs, see
the FY 2008 IPPS final rule with
comment period (72 FR 47141 through
47175). Also see Transmittal 1374
(change request 5748), dated November
7, 2007, for the ICD–9–CM coding
changes.
All of the ICD–9–CM coding changes
are reflected in the FY 2008 GROUPER,
Version 25.0, effective for IPPS
discharges occurring on or after October
1, 2007 through September 30, 2008.
The GROUPER Version 25.0 software
package assigns each case to a DRG on
the basis of the diagnosis and procedure
codes and demographic information
(that is age, sex, and discharge status).
The Medicare Code Editor (MCE) 24.0
uses the new ICD–9–CM codes to
validate coding for IPPS discharges on
or after October 1, 2007. For additional
information on the GROUPER Version
25.0 and MCE 24.0, see Transmittal
1374, dated November 7, 2007. The IPF
PPS has always used the same
GROUPER and Code Editor as the IPPS.
Therefore, the ICD–9–CM changes,
which were reflected in the GROUPER
Version 25.0 and MCE 24.0 on October
1, 2007, also became effective for the
IPF PPS for discharges occurring on or
after October 1, 2007.
The impact of the new MS–DRGs on
the IPF PPS is negligible. Mapping the
current DRGs to the MS–DRGs, there are
now 17 MS–DRGs, instead of the
original 15, for which the IPF PPS
provides an adjustment. In addition,
although the code set is updated, the
same associated adjustment factors
apply now that have been in place since
implementation of the IPF PPS, with
one exception that is unrelated to the
update to the codes. When DRGs 521
and 522 were consolidated into MS–
DRG 895, we carried over the
adjustment factor of 1.02 from DRG 521
to the newly consolidated MS–DRG.
This was done to reflect the higher
claims volume under DRG 521, with
more than eight times the number of
claims than billed under DRG 522. The
updated codes, which were effective
October 1, 2007, must be used to report
diagnostic or procedure information on
IPF PPS claims. These updates are
reflected in Table 4.
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25715
The official version of the ICD–9–CM
is available on CD–ROM from the U.S.
Government Printing Office. The FY
2008 version can be ordered by
contacting the Superintendent of
Documents, U.S. Government Printing
Office, Department 50, Washington, DC
20402–9329, telephone number (202)
512–1800. Questions concerning the
ICD–9–CM should be directed to
Patricia E. Brooks, Co-Chairperson,
ICD–9–CM Coordination and
Maintenance Committee, CMS, Center
for Medicare Management, Hospital and
Ambulatory Policy Group, Division of
Acute Care, Mailstop C4–08–06, 7500
Security Boulevard, Baltimore,
Maryland 21244–1850.
Further information concerning the
official version of the ICD–9–CM can be
found in the IPPS final rule with
comment period, ‘‘Changes to Hospital
Inpatient Prospective Payment System
and Fiscal Year 2008 Rates’’ in the
August 22, 2007 Federal Register (72 FR
47130) and at https://www.cms.hhs.gov/
QuarterlyProviderUpdates/downloads/
cms1533fc.pdf.
Table 4 below lists the FY 2008 new
ICD–9–CM diagnosis codes that group to
one of the 17 MS–DRGs for which the
IPF PPS provides an adjustment. This
table is only a listing of FY 2008
changes and does not reflect all of the
currently valid and applicable ICD–9–
CM codes classified in the MS–DRGs.
When coded as a principal code or
diagnosis, these codes receive the
correlating MS–DRG adjustment.
TABLE 4.—FY 2008 NEW DIAGNOSIS
CODES
Diagnosis
code
Description
315.34 ...........
Speech and
language
developmental
delay due to
hearing loss.
Idiopathic normal pressure hydrocephalus
(INPH).
331.5 .............
MS–DRG
886
056, 057
Since we do not plan to update the
regression analysis until we analyze IPF
PPS data, the MS–DRG adjustment
factors, shown in Table 5 below, will
continue to be paid for RY 2009. Table
5 reflects the changes that were made to
the DRGs under the IPF PPS in a
crosswalk of DRGs prior to October 1,
2007 to the new MS–DRGs, which were
effective October 1, 2007.
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TABLE 5.—FY 2008 CROSSWALK OF CURRENT DRGS TO NEW MS–DRGS APPLICABLE FOR THE PRINCIPAL DIAGNOSIS
ADJUSTMENT
(v25) MS–
DRG
after 10/01/07
(v24) DRG prior to
10/01/07
056
057
080
081
876
880
881
882
883
884
885
886
887
894
895
896
897
12 .....................................................
023 ...................................................
424 ...................................................
425 ...................................................
426 ...................................................
427 ...................................................
428 ...................................................
429 ...................................................
430 ...................................................
431 ...................................................
432 ...................................................
433 ...................................................
521 ...................................................
..........................................................
523 ...................................................
2. Payment for Comorbid Conditions
The intent of the comorbidity
adjustment is to recognize the increased
costs associated with comorbid
conditions by providing additional
payments for certain concurrent medical
or psychiatric conditions that are
expensive to treat. In the May 2007 IPF
PPS update notice (72 FR 25602), we
explained that the IPF PPS includes 17
comorbidity categories and identified
the new, revised and deleted ICD–9–CM
diagnosis codes that generate a
comborbid condition payment
adjustment under the IPF PPS for RY
2008 (72 FR 25609–13).
Comorbidities are specific patient
conditions that are secondary to the
patient’s principal diagnosis, and that
require treatment during the stay.
Diagnoses that relate to an earlier
episode of care and have no bearing on
the current hospital stay are excluded
and should not be reported on IPF
claims. Comorbid conditions must exist
MS–DRG descriptions
Adjustment
factor
Degenerative nervous system disorders w MCC .....................................
Degenerative nervous system disorders w/o MCC ..................................
Nontraumatic stupor & coma w MCC .......................................................
Nontraumatic stupor & coma w/o MCC ....................................................
O.R. procedure w principal diagnoses of mental illness ..........................
Acute adjustment reaction & psychosocial dysfunction ............................
Depressive neuroses .................................................................................
Neuroses except depressive .....................................................................
Disorders of personality & impulse control ...............................................
Organic disturbances & mental retardation ..............................................
Psychoses .................................................................................................
Behavioral & developmental disorders .....................................................
Other mental disorder diagnoses ..............................................................
Alcohol/drug abuse or dependence, left AMA ..........................................
Alcohol/drug abuse or dependence w rehabilitation therapy ....................
Alcohol/drug abuse or dependence w/o rehabilitation therapy w MCC ...
Alcohol/drug abuse or dependence w/o rehabilitation therapy w/o MCC
........................
1.05
........................
1.07
1.22
1.05
0.99
1.02
1.02
1.03
1.00
0.99
0.92
0.97
1.02
........................
0.88
at the time of admission or develop
subsequently, and affect the treatment
received, affect the length of stay (LOS)
or affect both treatment and LOS.
For each claim, an IPF may receive
only one comorbidity adjustment per
comorbidity category, but it may receive
an adjustment for more than one
comorbidity category. Billing
instructions require that IPFs must enter
the full ICD–9–CM codes for up to 8
additional diagnoses if they co-exist at
the time of admission or develop
subsequently.
The comorbidity adjustments were
determined based on the regression
analysis using the diagnoses reported by
hospitals in FY 2002. The principal
diagnoses were used to establish the
DRG adjustment and were not
accounted for in establishing the
comorbidity category adjustments,
except where ICD–9–CM ‘‘code first’’
instructions apply. As we explained in
the May 2007 IPF PPS notice (72 FR
25602), the code first rule applies when
a condition has both an underlying
etiology and a manifestation due to the
underlying etiology. For these
conditions, the ICD–9–CM has a coding
convention that requires the underlying
conditions to be sequenced first
followed by the manifestation.
Whenever a combination exists, there is
a ‘‘use additional code’’ note at the
etiology code and a ‘‘code first’’ note at
the manifestation code.
As discussed in the DRG section, it is
our policy to maintain the same
diagnostic coding set for IPFs that is
used under the IPPS for providing the
same psychiatric care. Although the
ICD–9–CM code set has been updated,
the same adjustment factors have been
in place since the implementation of the
IPF PPS. Table 6 below lists the FY 2008
new ICD diagnosis codes that impact the
comorbidity adjustments under the IPF
PPS. Table 6 is not a list of all currently
valid ICD codes applicable for the IPF
PPS comorbidity adjustments.
TABLE 6.—FY 2008 NEW ICD CODES APPLICABLE FOR THE COMORBIDITY ADJUSTMENTS DIAGNOSIS
sroberts on PROD1PC70 with NOTICES
Diagnosis code
040.41
040.42
058.10
058.11
058.12
058.21
058.29
058.81
058.82
058.89
200.30
.......................................
.......................................
.......................................
.......................................
.......................................
.......................................
.......................................
.......................................
.......................................
.......................................
.......................................
200.31 .......................................
200.32 .......................................
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Description
Comorbidity category
Infant botulism ...........................................................................
Wound botulism ........................................................................
Roseola infantum, unspecified ..................................................
Roseola infantum due to human herpesvirus 6 ........................
Roseola infantum due to human herpesvirus 7 ........................
Human herpesvirus 6 encephalitis ............................................
Other human herpesvirus encephalitis .....................................
Human herpesvirus 6 infection .................................................
Human herpesvirus 7 infection .................................................
Other human herpesvirus infection ...........................................
Marginal zone lymphoma, unspecified site, extranodal and
solid organ sites.
Marginal zone lymphoma, lymph nodes of head, face, and
neck.
Marginal zone lymphoma, intrathoracic lymph nodes ..............
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Infectious Diseases.
Infectious Diseases.
Infectious Diseases.
Infectious Diseases.
Infectious Diseases.
Infectious Diseases.
Infectious Diseases.
Infectious Diseases.
Infectious Diseases.
Infectious Diseases.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
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25717
TABLE 6.—FY 2008 NEW ICD CODES APPLICABLE FOR THE COMORBIDITY ADJUSTMENTS DIAGNOSIS—Continued
Diagnosis code
Description
200.33 .......................................
200.34 .......................................
Marginal zone lymphoma, intraabdominal lymph nodes ..........
Marginal zone lymphoma, lymph nodes of axilla and upper
limb.
Marginal zone lymphoma, lymph nodes of inguinal region and
lower limb.
Marginal zone lymphoma, intrapelvic lymph nodes ..................
Marginal zone lymphoma, spleen .............................................
Marginal zone lymphoma, lymph nodes of multiple sites .........
Mantle cell lymphoma, unspecified site, extranodal and solid
organ sites.
Mantle cell lymphoma, lymph nodes of head, face, and neck
Mantle cell lymphoma, intrathoracic lymph nodes ....................
Mantle cell lymphoma, intra-abdominal lymph nodes ..............
Mantle cell lymphoma, lymph nodes of axilla and upper limb
Mantle cell lymphoma, lymph nodes of inguinal region and
lower limb.
Mantle cell lymphoma, intrapelvic lymph nodes .......................
Mantle cell lymphoma, spleen ..................................................
Mantle cell lymphoma, lymph nodes of multiple sites ..............
Primary central nervous system lymphoma, unspecified site,
extranodal and solid organ sites.
Primary central nervous system lymphoma, lymph nodes of
head, face, and neck.
Primary central nervous system lymphoma, intrathoracic
lymph nodes.
Primary central nervous system lymphoma, intra-abdominal
lymph nodes.
Primary central nervous system lymphoma, lymph nodes of
axilla and upper limb.
Primary central nervous system lymphoma, lymph nodes of
inguinal region and lower limb.
Primary central nervous system lymphoma, intrapelvic lymph
nodes.
Primary central nervous system lymphoma, spleen .................
Primary central nervous system lymphoma, lymph nodes of
multiple sites.
Anaplastic large cell lymphoma, unspecified site, extranodal
and solid organ sites.
Anaplastic large cell lymphoma, lymph nodes of head, face,
and neck.
Anaplastic large cell lymphoma, intrathoracic lymph nodes .....
Anaplastic large cell lymphoma, intra-abdominal lymph nodes
Anaplastic large cell lymphoma, lymph nodes of axilla and
upper limb.
Anaplastic large cell lymphoma, lymph nodes of inguinal region and lower limb.
Anaplastic large cell lymphoma, intrapelvic lymph nodes ........
Anaplastic large cell lymphoma, spleen ...................................
Anaplastic large cell lymphoma, lymph nodes of multiple sites
Large cell lymphoma, unspecified site, extranodal and solid
organ sites.
Large cell lymphoma, lymph nodes of head, face, and neck ...
Large cell lymphoma, intrathoracic lymph nodes .....................
Large cell lymphoma, intra-abdominal lymph nodes ................
Large cell lymphoma, lymph nodes of axilla and upper limb ...
Large cell lymphoma, lymph nodes of inguinal region and
lower limb.
Large cell lymphoma, intrapelvic lymph nodes .........................
Large cell lymphoma, spleen ....................................................
Large cell lymphoma, lymph nodes of multiple sites ................
Peripheral T cell lymphoma, unspecified site, extranodal and
solid organ sites.
Peripheral T cell lymphoma, lymph nodes of head, face, and
neck.
Peripheral T cell lymphoma, intrathoracic lymph nodes ...........
Peripheral T cell lymphoma, intra-abdominal lymph nodes .....
Peripheral T cell lymphoma, lymph nodes of axilla and upper
limb.
Peripheral T cell lymphoma, lymph nodes of inguinal region
and lower limb.
Peripheral T cell lymphoma, intrapelvic lymph nodes ..............
Peripheral T cell lymphoma, spleen .........................................
200.35 .......................................
200.36
200.37
200.38
200.40
.......................................
.......................................
.......................................
.......................................
200.41
200.42
200.43
200.44
200.45
.......................................
.......................................
.......................................
.......................................
.......................................
200.46
200.47
200.48
200.50
.......................................
.......................................
.......................................
.......................................
200.51 .......................................
200.52 .......................................
200.53 .......................................
200.54 .......................................
200.55 .......................................
200.56 .......................................
200.57 .......................................
200.58 .......................................
200.60 .......................................
200.61 .......................................
200.62 .......................................
200.63 .......................................
200.64 .......................................
200.65 .......................................
200.66
200.67
200.68
200.70
.......................................
.......................................
.......................................
.......................................
200.71
200.72
200.73
200.74
200.75
.......................................
.......................................
.......................................
.......................................
.......................................
200.76
200.77
200.78
202.70
.......................................
.......................................
.......................................
.......................................
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202.71 .......................................
202.72 .......................................
202.73 .......................................
202.74 .......................................
202.75 .......................................
202.76 .......................................
202.77 .......................................
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Comorbidity category
Sfmt 4703
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology
Oncology
Oncology
Oncology
Treatment.
Treatment.
Treatment.
Treatment.
Oncology
Oncology
Oncology
Oncology
Oncology
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Oncology
Oncology
Oncology
Oncology
Treatment.
Treatment.
Treatment.
Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology
Oncology
Oncology
Oncology
Treatment.
Treatment.
Treatment.
Treatment.
Oncology
Oncology
Oncology
Oncology
Oncology
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Oncology
Oncology
Oncology
Oncology
Treatment.
Treatment.
Treatment.
Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
Oncology Treatment.
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TABLE 6.—FY 2008 NEW ICD CODES APPLICABLE FOR THE COMORBIDITY ADJUSTMENTS DIAGNOSIS—Continued
Diagnosis code
202.78
233.30
233.31
233.32
233.39
Description
.......................................
.......................................
.......................................
.......................................
.......................................
Comorbidity category
Peripheral T cell lymphoma, lymph nodes of multiple sites .....
Carcinoma in situ, unspecified female genital organ ................
Carcinoma in situ, vagina .........................................................
Carcinoma in situ, vulva ............................................................
Carcinoma in situ, other female genital organ ..........................
Oncology
Oncology
Oncology
Oncology
Oncology
Treatment.
Treatment.
Treatment.
Treatment.
Treatment.
Table 7 lists the invalid ICD–9–CM
codes no longer applicable for the
comorbidity adjustment. .
TABLE 7.—FY 2008 INVALID ICD CODES NO LONGER APPLICABLE FOR THE COMORBIDITY ADJUSTMENT
Diagnosis code
Description
233.3 .........................................
Carcinoma in situ, other and unspecified female genital organs.
The seventeen comorbidity categories
for which we are providing an
Comorbidity category.
adjustment, their respective codes,
including the new FY 2008 ICD codes,
Oncology Treatment.
and their respective adjustment factors,
are listed below in Table 8. .
TABLE 8.—RY 2009 DIAGNOSIS CODES AND ADJUSTMENT FACTORS FOR COMORBIDITY CATEGORIES
Adjustment
factor
Description of comorbidity
ICD–9CM code
Developmental Disabilities ........................
Coagulation Factor Deficits ......................
Tracheostomy ...........................................
Renal Failure, Acute .................................
317, 3180, 3181, 3182, and 319 .................................................................................
2860 through 2864 .......................................................................................................
51900—through 51909 and V440 ................................................................................
5845 through 5849, 63630, 63631, 63632, 63730, 63731, 63732, 6383, 6393,
66932, 66934, 9585.
40301, 40311, 40391, 40402, 40412, 40413, 40492, 40493, 5853, 5854, 5855,
5856, 5859, 586, V451, V560, V561, and V562.
1400 through 2399 with a radiation therapy code 92.21–92.29 or chemotherapy
code 99.25.
25002, 25003, 25012, 25013, 25022, 25023, 25032, 25033, 25042, 25043, 25052,
25053, 25062, 25063, 25072, 25073, 25082, 25083, 25092, and 25093.
260 through 262 ...........................................................................................................
3071, 30750, 31203, 31233, and 31234 .....................................................................
01000 through 04110, 042, 04500 through 05319, 05440 through 05449, 0550
through 0770, 0782 through 07889, and 07950 through 07959.
2910, 2920, 29212, 2922, 30300, and 30400 .............................................................
1.04
1.13
1.06
1.11
3910, 3911, 3912, 40201, 40403, 4160, 4210, 4211, and 4219 .................................
44024 and 7854 ...........................................................................................................
49121, 4941, 5100, 51883, 51884, V4611 and V4612, V4613 and V4614 ................
56960 through 56969, 9975, and V441 through V446 ................................................
6960, 7100, 73000 through 73009, 73010 through 73019, and 73020 through
73029.
96500 through 96509, 9654, 9670 through 9699, 9770, 9800 through 9809, 9830
through 9839, 986, 9890 through 9897.
1.11
1.10
1.12
1.08
1.09
Renal Failure, Chronic ..............................
Oncology Treatment .................................
Uncontrolled Diabetes-Mellitus with or
without complications.
Severe Protein Calorie Malnutrition ..........
Eating and Conduct Disorders .................
Infectious Disease ....................................
Drug and/or Alcohol Induced Mental Disorders.
Cardiac Conditions ...................................
Gangrene ..................................................
Chronic Obstructive Pulmonary Disease ..
Artificial Openings-Digestive and Urinary
Severe Musculoskeletal and Connective
Tissue Diseases.
Poisoning ..................................................
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3. Patient Age Adjustments
As explained in the November 2004
IPF PPS final rule, we analyzed the
impact of age on per diem cost by
examining the age variable (that is, the
range of ages) for payment adjustments.
In general, we found that the cost per
day increases with increasing age. The
older age groups are more costly than
the under 45 age group, the differences
in per diem cost increase for each
successive age group, and the
differences are statistically significant.
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For RY 2009, we are continuing to use
the patient age adjustments currently in
effect and shown in Table 9 below.
TABLE 9.—AGE GROUPINGS AND
ADJUSTMENT FACTORS
Adjustment
factor
Age
Under 45 ...............................
45 and under 50 ...................
50 and under 55 ...................
55 and under 60 ...................
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1.00
1.01
1.02
1.04
1.11
1.07
1.05
1.13
1.12
1.07
1.03
1.11
TABLE 9.—AGE GROUPINGS AND
ADJUSTMENT FACTORS—Continued
Age
60
65
70
75
80
and
and
and
and
and
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under 70 ...................
under 75 ...................
under 80 ...................
over ..........................
07MYN1
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1.07
1.10
1.13
1.15
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Federal Register / Vol. 73, No. 89 / Wednesday, May 7, 2008 / Notices
4. Variable Per Diem Adjustments
We explained in the November 2004
IPF PPS final rule that a regression
analysis indicated that per diem cost
declines as the LOS increases (69 FR
66946). The variable per diem
adjustments to the Federal per diem
base rate account for ancillary and
administrative costs that occur
disproportionately in the first days after
admission to an IPF.
We used a regression analysis to
estimate the average differences in per
diem cost among stays of different
lengths. As a result of this analysis, we
established variable per diem
adjustments that begin on day 1 and
decline gradually until day 21 of a
patient’s stay. For day 22 and thereafter,
the variable per diem adjustment
remains the same each day for the
remainder of the stay. However, the
adjustment applied to day 1 depends
upon whether the IPF has a qualifying
ED. If an IPF has a qualifying ED, it
receives a 1.31 adjustment factor for day
1 of each patient stay. If an IPF does not
have a qualifying ED, it receives a 1.19
adjustment factor for day 1 of the stay.
The ED adjustment is explained in more
detail in section IV.C.5 of this notice.
For RY 2009, we are continuing to use
the variable per diem adjustment factors
currently in effect as shown in Table 10
below.
A complete discussion of the variable
per diem adjustments appears in the
November 2004 IPF PPS final rule (69
FR 66946).
TABLE 10.—VARIABLE PER DIEM
ADJUSTMENTS
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Day-of-stay
Adjustment
factor
Day 1—IPF Without a Qualified ED ..............................
Day 1—IPF With a Qualified
ED .....................................
Day 2 ....................................
Day 3 ....................................
Day 4 ....................................
Day 5 ....................................
Day 6 ....................................
Day 7 ....................................
Day 8 ....................................
Day 9 ....................................
Day 10 ..................................
Day 11 ..................................
Day 12 ..................................
Day 13 ..................................
Day 14 ..................................
Day 15 ..................................
Day 16 ..................................
Day 17 ..................................
Day 18 ..................................
Day 19 ..................................
Day 20 ..................................
Day 21 ..................................
After Day 21 .........................
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1.31
1.12
1.08
1.05
1.04
1.02
1.01
1.01
1.00
1.00
0.99
0.99
0.99
0.99
0.98
0.97
0.97
0.96
0.95
0.95
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C. Facility-Level Adjustments
The IPF PPS includes facility-level
adjustments for the wage index, IPFs
located in rural areas, teaching IPFs,
cost of living adjustments for IPFs
located in Alaska and Hawaii, and IPFs
with a qualifying ED.
1. Wage Index Adjustment
As discussed in the May 2006 IPF PPS
final rule, and in the May 2007 notice,
in providing an adjustment for area
wage levels, the labor-related portion of
an IPF’s Federal prospective payment is
adjusted using an appropriate wage
index. An IPF’s area wage index value
is determined based on the actual
location of the IPF in an urban or rural
area as defined in § 412.64(b)(1)(ii)(A)
through (C).
Since the inception of the IPF PPS, we
have used hospital wage data in
developing a wage index to be applied
to IPFs. We are continuing that practice
for RY 2009. We apply the wage index
adjustment to the labor-related portion
of the Federal rate, which is 75.631
percent. This percentage reflects the
labor-related relative importance of the
RPL market basket for RY 2009. The IPF
PPS uses the pre-floor, pre-reclassified
hospital wage index. Changes to the
wage index are made in a budget neutral
manner, so that updates do not increase
expenditures.
For RY 2009, we are applying the
most recent hospital wage index using
the most recent hospital wage data, and
applying an adjustment in accordance
with our budget neutrality policy. This
policy requires us to estimate the total
amount of IPF PPS payments in RY
2008 and divide that amount by the
total estimated IPF PPS payments in RY
2009. The estimated payments are based
on FY 2006 IPF claims, inflated to the
appropriate RY. This quotient is the
wage index budget neutrality factor, and
it is applied in the update of the Federal
per diem base rate for RY 2009. The
wage index budget neutrality factor for
RY 2009 is 1.0010.
The wage index applicable for RY
2009 appears in Table 1 and Table 2 in
Addendum B of this notice. As
explained in the May 2006 IPF PPS final
rule for RY 2007 (71 FR 27061), and in
the IPF PPS May 2007 notice for RY
2008 (72 FR 25602), the IPF PPS applies
the hospital wage index without a holdharmless policy, and without an outcommuting adjustment or out-migration
adjustment because we feel these
policies apply only to the IPPS.
In the May 2006 IPF PPS final rule for
RY 2007 (71 FR 27061), we adopted the
changes discussed in the Office of
Management and Budget (OMB)
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25719
Bulletin No. 03–04 (June 6, 2003),
which announced revised definitions
for Metropolitan Statistical Areas
(MSAs), and the creation of
Micropolitan Statistical Areas and
Combined Statistical Areas. In adopting
the OMB Core-Based Statistical Area
(CBSA) geographic designations, since
the IPF PPS was already in a transition
period from TEFRA payments to PPS
payments, we did not provide a separate
transition for the wage index.
As was the case in RY 2008, for RY
2009, we will be using the full CBSAbased wage index values as presented in
Tables 1 and 2 in Addendum B of this
notice.
Finally, we continue to use the same
methodology discussed in the IPF PPS
proposed rule for RY 2007 (71 FR 3633),
and finalized in the May 2006 IPF PPS
final rule for RY 2007 (71 FR 27061) to
address those geographic areas where
there are no hospitals and, thus, no
hospital wage index data on which to
base the calculation of the RY 2009 IPF
PPS wage index. For RY 2009, those
areas consist of rural Massachusetts,
rural Puerto Rico and urban CBSA
(25980) Hinesville-Fort Stewart, GA.
A complete discussion of the CBSA
labor market definitions appears in the
May 2006 IPF PPS final rule (71 FR
27061 through 27067).
a. Clarification of New England Deemed
Counties
We are also taking this opportunity to
address the change in the treatment of
‘‘New England deemed counties’’ (that
is, those counties in New England listed
in § 412.64(b)(1)(ii)(B) that were deemed
to be parts of urban areas under section
601(g) of the Social Security
Amendments of 1983) that was made in
the FY 2008 IPPS final rule with
comment period. These counties
include the following: Litchfield
County, Connecticut; York County,
Maine; Sagadahoc County, Maine;
Merrimack County, New Hampshire;
and Newport County, Rhode Island. Of
these five ‘‘New England deemed
counties,’’ three (York County,
Sagadahoc County, and Newport
County) are also included in
metropolitan statistical areas defined by
OMB and are considered urban under
both the current IPPS and IPF PPS labor
market area definitions in
§ 412.64(b)(1)(ii)(A). The remaining two,
Litchfield County and Merrimack
County, are geographically located in
areas that are considered rural under the
current IPPS (and IPF PPS) labor market
area definitions (however, they have
been previously deemed urban under
the IPPS in certain circumstances as
discussed below).
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In the FY 2008 IPPS final rule with
comment period (72 FR 47337 through
47338), § 412.64(b)(1)(ii)(B) was revised
such that the two ‘‘New England
deemed counties’’ that are still
considered rural under the OMB
definitions (Litchfield County, CT and
Merrimack County, NH), are no longer
considered urban effective for
discharges occurring on or after October
1, 2007, and therefore, are considered
rural in accordance with
§ 412.64(b)(1)(ii)(C). However, for
purposes of payment under the IPPS,
acute-care hospitals located within
those areas are treated as being
reclassified to their deemed urban area
effective for discharges occurring on or
after October 1, 2007 (see 72 FR 47337
through 47338). We note that the IPF
PPS does not provide for such
geographic reclassification (71 FR 27061
through 27067). Also in the FY 2008
IPPS final rule with comment period (72
FR 47338), we explained that we limited
this policy change for the ‘‘New England
deemed counties’’ only to IPPS
hospitals, and any change to non-IPPS
provider wage indices would be
addressed in the respective payment
system rules.
Accordingly, as stated above, we are
taking the opportunity to clarify the
treatment of ‘‘New England deemed
counties’’ under the IPF PPS in this
notice. As discussed above, under
existing § 412.402 and § 412.424(d)(1)(i),
an IPF’s wage index is determined based
on the location of the IPF in an urban
or rural area as defined in
§ 412.64(b)(1)(ii)(A) through (C). Under
existing § 412.402, an urban area under
the IPF PPS is currently defined at
§ 412.64(b)(1)(ii)(A) and (B), and a rural
area is defined at § 412.64(b)(1)(ii)(C) as
any area outside of an urban area.
Historical changes to the labor market
area/geographic classifications and
annual updates to the wage index values
under the IPF PPS are made effective
July 1 each year. When we established
the most recent IPF PPS payment rate
update, effective for IPF discharges
occurring on or after July 1, 2007
through June 30, 2008, we considered
the ‘‘New England deemed counties’’
(including Litchfield County, CT and
Merrimack County, NH) as urban for RY
2008 (in accordance with the definitions
of urban and rural stated in the RY 2008
IPF PPS notice (72 FR 25602) and as
evidenced by the inclusion of Litchfield
County as one of the constituent
counties of urban CBSA 25540
(Hartford-West Hartford-East Hartford,
CT), and the inclusion of Merrimack
County as one of the constituent
counties of urban CBSA 31700
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21:00 May 06, 2008
Jkt 214001
(Manchester-Nashua, NH)). (See 72 FR
25643 and 25651, respectively).
As noted above, existing § 412.402
indicates that the terms ‘‘rural’’ and
‘‘urban’’ are defined according to the
definitions of those terms in
§ 412.64(b)(1)(ii)(A) through (C).
Effective for discharges on or after July
1, 2008, § 412.64(b)(1)(ii)(B) is no longer
applicable under the IPF PPS.
Therefore, as Litchfield County, CT and
Merrimack County, NH would be
considered rural areas in accordance
with our regulations at § 412.402, these
two counties will be ‘‘rural’’ under the
IPF PPS effective with the next update
of the IPF PPS payment rates, which
will be July 1, 2008 (under the IPF PPS
effective for discharges on or after July
1, 2008, Litchfield County, CT and
Merrimack County, NH are not urban
under § 412.64(b)(1)(ii)(A) through (B),
as revised under the RY 2008 IPPS final
rule with comment period, and
therefore are rural under
§ 412.64(b)(1)(ii)(C)). Litchfield County,
CT and Merrimack County, NH will be
considered ‘‘rural’’ effective for IPF PPS
discharges occurring on or after July 1,
2008, and will no longer be considered
as being part of urban CBSA 25540
(Hartford-West Hartford-East Hartford,
CT) and urban CBSA 31700
(Manchester-Nashua, NH), respectively.
We do not need to make any changes to
our regulations to effectuate this change.
We note that this policy is consistent
with our policy of not taking into
account IPPS geographic
reclassifications in determining
payments under the IPF PPS.
Four IPFs (two in Litchfield County,
CT, and two in Merrimack County, NH)
greatly benefit from treating the counties
in which they are located as rural. These
IPFs will begin to receive the rural
facility adjustment and see an
approximate 17 percent increase in
payments. Five IPFs in NH that are
currently treated as rural will
experience an approximate 3 percent
decrease in payments because the rural
NH wage index value decreases when
this change is made. One IPF in CT that
is currently treated as rural will
experience an approximate 4 percent
decrease in payments because the rural
CT wage index value is lower when this
change is made.
The area wage index values for CBSAs
31700 and 25540 increase with the
change. No other IPFs in CT or NH are
affected by treating Litchfield and
Merrimack Counties as rural.
b. Multi-Campus—Wage Index Data
Collection
Historically, under the IPF PPS, we
have established IPF PPS wage index
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Sfmt 4703
values calculated from acute care IPPS
hospital wage data without taking into
account geographic reclassification
under sections 1886(d)(8) and (d)(10) of
the Act. As we discussed in the May
2006 IPF PPS final rule (71 FR 27040),
hospitals that are excluded from the
IPPS are not required to provide wagerelated information on the Medicare
cost report (which is needed in order to
make geographic reclassifications).
Thus, the wage adjustment established
under the IPF PPS is based on an IPF’s
actual location without regard to the
urban or rural designation of any related
or affiliated provider.
In the RY 2008 IPF PPS notice (72 FR
25602), we established IPF PPS wage
index values for the RY 2008 calculated
from the same data (collected from cost
reports submitted by hospitals for cost
reporting periods beginning during FY
2003) used to compute the FY 2007
acute care hospital inpatient wage index
data without taking into account
geographic reclassification under
sections 1886(d)(8) and (d)(10) of the
Act because that was the best available
data at that time. The IPF PPS wage
index values applicable for discharges
occurring on or after July 1, 2007
through June 30, 2008 are shown in
Table 1 (for urban areas) and Table 2
(for rural areas) in the Addendum to the
RY 2008 IPF PPS final rule (72 FR 25627
through 25673).
For RY 2009, the same data (collected
from cost reports submitted by hospitals
for cost reporting periods beginning
during FY 2004) used to compute the
FY 2008 acute care hospital inpatient
wage index data without taking into
account geographic reclassification
under sections 1886(d)(8) and (d)(10) of
the Act was used to determine the
applicable wage index values under the
IPF PPS because these data (FY 2004)
are the most recent complete data. (For
information on the data used to
compute the FY 2008 IPPS wage index,
refer to the FY 2008 IPPS final rule with
comment period (72 FR 47308 through
47309, 47315)). We are continuing to
use IPPS wage data as a proxy to
determine the IPF wage index values for
RY 2009 because both IPFs and acutecare hospitals are required to meet the
same certification criteria set forth in
section 1861(e) of the Act to participate
as a hospital in the Medicare program
and they both compete in the same labor
markets, and therefore, experience
similar wage-related costs. We note that
the IPPS wage data used to determine
the RY 2009 IPF wage index values
reflects our policy that was adopted
under the IPPS beginning in FY 2008
that apportions the wage data for multicampus hospitals located in different
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Federal Register / Vol. 73, No. 89 / Wednesday, May 7, 2008 / Notices
labor market areas (CBSAs) to each
CBSA where the campuses are located
(see the FY 2008 IPPS final rule with
comment period (72 FR 47317 through
47320)). The RY 2009 IPF PPS wage
index values presented in this notice
were computed consistent with our prereclassified IPPS wage index policy
(that is, our historical policy of not
taking into account IPPS geographic
reclassifications in determining
payments under the IPF PPS).
For the RY 2009 IPF PPS, the wage
index was computed from IPPS wage
data (submitted by hospitals for cost
reporting periods beginning in FY 2004
(just like the FY 2008 IPPS wage
index)), which allocated salaries and
hours to the campuses of two multicampus hospitals with campuses that
are located in different labor areas, one
in Massachusetts and another in Illinois.
Thus, the RY 2009 IPF PPS wage index
values for the following CBSAs are
affected by this policy: Boston-Quincy,
MA (CBSA 14484), Providence-New
Bedford-Falls River, RI–MA (CBSA
39300), Chicago-Naperville-Joliet, IL
(CBSA 16974) and Lake CountyKenosha County, IL–WI (CBSA 29404)
(refer to Table 1 in the Addendum of
this notice).
The table below describes the change
in wage index value and the number of
IPFs affected by the multi-campus
hospital policy change:
TABLE 11.—IPFS AFFECTED BY THE MULTI-CAMPUS HOSPITAL POLICY CHANGE
No. of
IPFs
CBSA
14484
16974
29404
39300
(Boston-Quincy, MA) ............................................................................................................................................
(Chicago-Naperville-Joliet, IL) ..............................................................................................................................
(Lake County-Kenosha County, IL–WI) ...............................................................................................................
(Providence-New Bedford-Falls River, RI–MA) ....................................................................................................
sroberts on PROD1PC70 with NOTICES
c. OMB Bulletins
The Office of Management and Budget
(OMB) publishes bulletins regarding
CBSA changes, including changes to
CBSA numbers and titles. In the May
2006 IPF PPS final rule for FY 2006 (71
FR 27040), we adopted the changes
discussed in the OMB Bulletin No.
03–04 (June 6, 2003), available online at
https://www.whitehouse.gov/omb/
bulletins/b03-04.html. Those changes
were strictly nomenclature changes and
did not represent substantive changes to
the CBSA-based designations. In this
notice, we incorporate the CBSA
nomenclature changes published in the
most recent OMB bulletin that applies
to the hospital wage data used to
determine the current IPF PPS wage
index, and we expect to do the same for
all such OMB CBSA nomenclature
changes in future IPF PPS rules and
notices, as necessary. The OMB
bulletins may be accessed online at
https://www.whitehouse.gov/omb/
bulletins/.
2. Adjustment for Rural Location
In the November 2004 IPF PPS final
rule, we provided a 17 percent payment
adjustment for IPFs located in a rural
area. This adjustment was based on the
regression analysis, which indicated
that the per diem cost of rural facilities
was 17 percent higher than that of urban
facilities after accounting for the
influence of the other variables included
in the regression. For RY 2009, we are
applying a 17 percent payment
adjustment for IPFs located in a rural
area as defined at § 412.64(b)(1)(ii)(C). A
complete discussion of the adjustment
for rural locations appears in the
November 2004 IPF PPS final rule (69
FR 66954).
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3. Teaching Adjustment
In the November 2004 IPF PPS final
rule, we implemented regulations at
§ 412.424(d)(1)(iii) to establish a facilitylevel adjustment for IPFs that are, or are
part of, teaching institutions. The
teaching adjustment accounts for the
higher indirect operating costs
experienced by facilities that participate
in graduate medical education (GME)
programs. Payments are made based on
the number of full-time equivalent
interns and residents training in the IPF.
Medicare makes direct GME payments
(for direct costs such as resident and
teaching physician salaries, and other
direct teaching costs) to all teaching
hospitals including those paid under the
IPPS, and those that were once paid
under the TEFRA rate-of-increase limits
but are now paid under other PPSs.
These direct GME payments are made
separately from payments for hospital
operating costs and are not part of the
PPSs. The direct GME payments do not
address the estimated higher indirect
operating costs teaching hospitals may
face.
For teaching hospitals paid under the
TEFRA rate of increase limits, Medicare
did not make separate medical
education payments because payments
to these hospitals were based on the
hospitals’ reasonable costs. Since
payments under TEFRA were based on
hospitals’ reasonable costs, the higher
indirect costs that might be associated
with teaching programs would
automatically have been factored into
the TEFRA payments.
The results of the regression analysis
of FY 2002 IPF data established the
basis for the payment adjustments
included in the November 2004 IPF PPS
final rule. The results showed that the
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17
47
2
12
Wage index
value change
0.0153
¥0.002
0.0288
¥0.0111
indirect teaching cost variable is
significant in explaining the higher
costs of IPFs that have teaching
programs. We calculated the teaching
adjustment based on the IPF’s ‘‘teaching
variable,’’ which is one plus the ratio of
the number of full-time equivalent (FTE)
residents training in the IPF (subject to
limitations described below) to the IPF’s
average daily census (ADC).
In the regression analysis, the
logarithm of the teaching variable had a
coefficient value of 0.5150. We
converted this cost effect to a teaching
payment adjustment by treating the
regression coefficient as an exponent
and raising the teaching variable to a
power equal to the coefficient value. We
note that the coefficient value of 0.5150
was based on the regression analysis
holding all other components of the
payment system constant.
As with other adjustment factors
derived through the regression analysis,
we do not plan to rerun the regression
analysis until we analyze IPF PPS data.
Therefore, for RY 2009, we are retaining
the coefficient value of 0.5150 for the
teaching adjustment to the Federal per
diem base rate.
A complete discussion of how the
teaching adjustment was calculated
appears in the November 2004 IPF PPS
final rule (69 FR 66954 through 66957)
and the May 2006 IPF PPS final rule (71
FR 27067 through 27070).
4. Cost of Living Adjustment for IPFs
Located in Alaska and Hawaii
The IPF PPS includes a payment
adjustment for IPFs located in Alaska
and Hawaii based upon the county in
which the IPF is located. As we
explained in the November 2004 IPF
PPS final rule, the FY 2002 data
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demonstrated that IPFs in Alaska and
Hawaii had per diem costs that were
disproportionately higher than other
IPFs. Other Medicare PPSs (for example,
the IPPS and LTCH PPS) have adopted
a cost of living adjustment (COLA) to
account for the cost differential of care
furnished in Alaska and Hawaii.
We analyzed the effect of applying a
COLA to payments for IPFs located in
Alaska and Hawaii. The results of our
analysis demonstrated that a COLA for
IPFs located in Alaska and Hawaii
would improve payment equity for
these facilities. As a result of this
analysis, we provided a COLA in the
November 2004 IPF PPS final rule.
In general, the COLA accounts for the
higher costs in the IPF and eliminates
the projected loss that IPFs in Alaska
and Hawaii would experience absent
the COLA. A COLA factor for IPFs
located in Alaska and Hawaii is made
by multiplying the non-labor share of
the Federal per diem base rate by the
applicable COLA factor based on the
COLA area in which the IPF is located.
As previously stated, we will update
the COLA factors according to updates
established by the U.S. Office of
Personnel Management (OPM), which
issued a final rule to change COLA rates
effective September 1, 2006.
The COLA factors are published on
the OPM Web site at https://
www.opm.gov/oca/cola/rates.asp.
We note that the COLA areas for
Alaska are not defined by county as are
the COLA areas for Hawaii. In 5 CFR
591.207, the OPM established the
following COLA areas:
(a) City of Anchorage, and 80kilometer (50-mile) radius by road, as
measured from the Federal courthouse;
(b) City of Fairbanks, and 80kilometer (50-mile) radius by road, as
measured from the Federal courthouse;
(c) City of Juneau, and 80-kilometer
(50-mile) radius by road, as measured
from the Federal courthouse;
(d) Rest of the State of Alaska.
In the November 2004 and May 2006
IPF PPS final rules, we showed only one
COLA for Alaska because all four areas
were the same amount (1.25). Effective
September 1, 2006, the OPM updated
the COLA amounts and there are now
two different amounts for the Alaska
COLA areas (1.24 and 1.25).
For RY 2009, IPFs located in Alaska
and Hawaii will receive the updated
COLA factors based on the COLA area
in which the IPF is located and as
shown in Table 12 below.
TABLE 12.— COLA FACTORS FOR ALASKA AND HAWAII IPFS
Location
Alaska ..........................................................................
Hawaii ..........................................................................
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5. Adjustment for IPFs With a
Qualifying Emergency Department (ED)
Currently, the IPF PPS includes a
facility-level adjustment for IPFs with
qualifying EDs. We provide an
adjustment to the standardized Federal
per diem base rate to account for the
costs associated with maintaining a fullservice ED. The adjustment is intended
to account for ED costs allocated to the
hospital’s distinct part psychiatric unit
for preadmission services otherwise
payable under the Medicare Outpatient
Prospective Payment System (OPPS)
furnished to a beneficiary during the
day immediately preceding the date of
admission to the IPF (see § 413.40(c))
and the overhead cost of maintaining
the ED. This payment is a facility-level
adjustment that applies to all IPF
admissions (with the one exception as
described below), regardless of whether
a particular patient receives
preadmission services in the hospital’s
ED.
The ED adjustment is incorporated
into the variable per diem adjustment
for the first day of each stay for IPFs
with a qualifying ED. That is, IPFs with
a qualifying ED receive an adjustment
factor of 1.31 as the variable per diem
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Anchorage .............................................................................................................
Fairbanks ...............................................................................................................
Juneau ...................................................................................................................
Rest of Alaska .......................................................................................................
Honolulu County ....................................................................................................
Hawaii County .......................................................................................................
Kauai County .........................................................................................................
Maui County ..........................................................................................................
Kalawao County ....................................................................................................
adjustment for day 1 of each stay. If an
IPF does not have a qualifying ED, it
receives an adjustment factor of 1.19 as
the variable per diem adjustment for day
1 of each patient stay.
The ED adjustment is made on every
qualifying claim except as described
below. As specified in
§ 412.424(d)(1)(v)(B), the ED adjustment
is not made where a patient is
discharged from an acute care hospital
or CAH and admitted to the same
hospital’s or CAH’s psychiatric unit. An
ED adjustment is not made in this case
because the costs associated with ED
services are reflected in the DRG
payment to the acute care hospital or
through the reasonable cost payment
made to the CAH. If we provided the ED
adjustment in these cases, the hospital
would be paid twice for the overhead
costs of the ED (69 FR 66960).
Therefore, when patients are
discharged from an acute care hospital
or CAH and admitted to the same
hospital’s or CAH’s psychiatric unit, the
IPF receives the 1.19 adjustment factor
as the variable per diem adjustment for
the first day of the patient’s stay in the
IPF.
For RY 2009, we are retaining the 1.31
adjustment factor for IPFs with
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1.24
1.24
1.24
1.25
1.25
1.17
1.25
1.25
1.25
qualifying EDs. A complete discussion
of the steps involved in the calculation
of the ED adjustment factor appears in
the November 2004 IPF PPS final rule
(69 FR 66959 through 66960) and the
May 2006 IPF PPS final rule (71 FR
27070 through 27072).
D. Other Payment Adjustments and
Policies
For RY 2009, the IPF PPS includes the
following payment adjustments: An
outlier adjustment to promote access to
IPF care for those patients who require
expensive care and to limit the financial
risk of IPFs treating unusually costly
patients. In this section, we also explain
the reason for ending the stop-loss
provision that was applicable during the
transition period.
1. Outlier Payments
In the November 2004 IPF PPS final
rule, we implemented regulations at
§ 412.424(d)(3)(i) to provide a per-case
payment for IPF stays that are
extraordinarily costly. Providing
additional payments to IPFs for
extremely costly cases strongly
improves the accuracy of the IPF PPS in
determining resource costs at the patient
and facility level. These additional
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payments reduce the financial losses
that would otherwise be incurred in
treating patients who require more
costly care and, therefore, reduce the
incentives for IPFs to under-serve these
patients.
We make outlier payments for
discharges in which an IPF’s estimated
total cost for a case exceeds a fixed
dollar loss threshold amount
(multiplied by the IPF’s facility-level
adjustments) plus the Federal per diem
payment amount for the case.
In instances when the case qualifies
for an outlier payment, we pay 80
percent of the difference between the
estimated cost for the case and the
adjusted threshold amount for days 1
through 9 of the stay (consistent with
the median LOS for IPFs in FY 2002),
and 60 percent of the difference for day
10 and thereafter. We established the 80
percent and 60 percent loss sharing
ratios because we were concerned that
a single ratio established at 80 percent
(like other Medicare PPSs) might
provide an incentive under the IPF per
diem payment system to increase LOS
in order to receive additional payments.
After establishing the loss sharing ratios,
we determined the current fixed dollar
loss threshold amount of $6,488 through
payment simulations designed to
compute a dollar loss beyond which
payments are estimated to meet the 2
percent outlier spending target.
a. Update to the Outlier Fixed Dollar
Loss Threshold Amount
In accordance with the update
methodology described in § 412.428(d),
we are updating the fixed dollar loss
threshold amount used under the IPF
PPS outlier policy. Based on the
regression analysis and payment
simulations used to develop the IPF
PPS, we established a 2 percent outlier
policy which strikes an appropriate
balance between protecting IPFs from
extraordinarily costly cases while
ensuring the adequacy of the Federal
per diem base rate for all other cases
that are not outlier cases.
We believe it is necessary to update
the fixed dollar loss threshold amount
because analysis of the latest available
data (that is, FY 2006 IPF claims) and
rate increases indicates adjusting the
fixed dollar loss amount is necessary in
order to maintain an outlier percentage
that equals 2 percent of total estimated
IPF PPS payments.
In the May 2006 IPF PPS Final Rule
(71 FR 27072), we describe the process
by which we calculate the outlier fixed
dollar loss threshold amount. We
continue to use this process for RY
2009. We begin by simulating aggregate
payments with and without an outlier
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policy, and applying an iterative process
to a fixed dollar loss amount that will
result in outlier payments being equal to
2 percent of total estimated payments
under the simulation. Based on this
process, for RY 2009, the IPF PPS will
use $6,113 as the fixed dollar loss
threshold amount in the outlier
calculation in order to maintain the 2
percent outlier policy.
b. Statistical Accuracy of Cost-to-Charge
Ratios
As previously stated, under the IPF
PPS, an outlier payment is made if an
IPF’s cost for a stay exceeds a fixed
dollar loss threshold amount. In order to
establish an IPF’s cost for a particular
case, we multiply the IPF’s reported
charges on the discharge bill by its
overall cost to charge ratio (CCR). This
approach to determining an IPF’s cost is
consistent with the approach used
under the IPPS and other PPSs. In FY
2004, we implemented changes to the
IPPS outlier policy used to determine
CCRs for acute care hospitals because
we became aware that payment
vulnerabilities resulted in inappropriate
outlier payments. Under the IPPS, we
established a statistical measure of
accuracy for CCRs in order to ensure
that aberrant CCR data did not result in
inappropriate outlier payments.
As we indicated in the November
2004 IPF PPS final rule, because we
believe that the IPF outlier policy is
susceptible to the same payment
vulnerabilities as the IPPS, we adopted
an approach to ensure the statistical
accuracy of CCRs under the IPF PPS (69
FR 66961). Therefore, we adopted the
following procedure in the November
2004 IPF PPS final rule:
• We calculated two national ceilings,
one for IPFs located in rural areas and
one for IPFs located in urban areas. We
computed the ceilings by first
calculating the national average and the
standard deviation of the CCR for both
urban and rural IPFs.
To determine the rural and urban
ceilings, we multiplied each of the
standard deviations by 3 and added the
result to the appropriate national CCR
average (either rural or urban). The
upper threshold CCR for IPFs in RY
2009 is 1.8041 for rural IPFs, and 1.6724
for urban IPFs, based on CBSA-based
geographic designations. If an IPF’s CCR
is above the applicable ceiling, the ratio
is considered statistically inaccurate
and we assign the appropriate national
(either rural or urban) median CCR to
the IPF.
We are applying the national CCRs to
the following situations:
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++ New IPFs that have not yet
submitted their first Medicare cost
report.
++ IPFs whose CCR is in excess of 3
standard deviations above the
corresponding national geometric mean
(that is, above the ceiling).
++ Other IPFs for whom the Medicare
contractor obtains inaccurate or
incomplete data with which to calculate
a CCR.
For new IPFs, we are using these
national CCRs until the facility’s actual
CCR can be computed using the first
tentatively settled or final settled cost
report, which will then be used for the
subsequent cost report period.
We are not making any changes to the
procedures for ensuring the statistical
accuracy of CCRs in RY 2009. However,
we are updating the national urban and
rural CCRs (ceilings and medians) for
IPFs for RY 2009 based on the CCRs
entered in the latest available IPF PPS
Provider Specific File.
The national CCRs for RY 2009 are
0.686 for rural IPFs and 0.5370 for urban
IPFs and will be used in each of the
three situations listed above. These
calculations are based on the IPF’s
location (either urban or rural) using the
CBSA-based geographic designations.
A complete discussion regarding the
national median CCRs appears in the
November 2004 IPF PPS final rule (69
FR 66961 through 66964).
2. Stop-Loss Provision
In the November 2004 IPF PPS final
rule, we implemented a stop-loss policy
that reduces financial risk to IPFs
expected to experience substantial
reductions in Medicare payments
during the period of transition to the IPF
PPS. This stop-loss policy guarantees
that each facility receives total IPF PPS
payments that are no less than 70
percent of its TEFRA payments had the
IPF PPS not been implemented.
This policy is applied to the IPF PPS
portion of Medicare payments during
the 3-year transition. During the first
year, for transitioning IPFs, threequarters of the payment was based on
TEFRA and one-quarter on the IPF PPS
payment amount. In the second year,
one-half of the payment was based on
TEFRA and one-half on the IPF PPS
payment amount. In the third year, onequarter of the payment was based on
TEFRA and three-quarters on the IPF
PPS. For cost report periods beginning
on or after January 1, 2008, payments
are based 100 percent on the IPF PPS.
The combined effects of the transition
and the stop-loss policies ensure that
the total estimated IPF PPS payments
were no less than 92.5 percent in the
first year, 85 percent in the second year,
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and 77.5 percent in the third year.
Under the 70 percent policy, in the third
year, 25 percent of an IPF’s payment is
TEFRA payments, and 75 percent is IPF
PPS payments, which are guaranteed to
be at least 70 percent of the TEFRA
payments. The resulting 77.5 percent of
TEFRA payments is the sum of 25
percent and 75 percent times 70 percent
(which equals 52.5 percent).
In the implementation year, the 70
percent of TEFRA payment stop-loss
policy required a reduction in the
standardized Federal per diem and ECT
base rates of 0.39 percent in order to
make the stop-loss payments budget
neutral.
For the RY 2009 (that is for discharges
occurring on or after July 1, 2008
through June 30, 2009), we are not
making any changes to the stop-loss
policy for IPFs continuing to transition.
However, beginning January 1, 2009, the
stop-loss provision will have ended for
all IPFs because it was implemented to
be effective for the duration of the
transition period, and the transition
period will be completed beginning
January 1, 2009. As indicated in
‘‘Section III. A.2.6 of this notice for RY
2009, we are increasing the Federal per
diem base rate and ECT rate by 0.39
percent because these rates were
reduced by 0.39 percent in the
implementation year to ensure stop-loss
payments were budget neutral.
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V. Waiver of Proposed Rulemaking
We ordinarily publish a notice of
proposed rulemaking in the Federal
Register to provide a period for public
comment before the provisions of a rule
take effect. We can waive this
procedure, however, if we find good
cause that notice and comment
procedures are impracticable,
unnecessary, or contrary to the public
interest and we incorporate a statement
of finding and its reasons in the notice.
We find it is unnecessary to undertake
notice and comment rulemaking for the
update in this notice because the update
does not make any substantive changes
in policy, but merely reflects the
application of previously established
methodologies. Therefore, under 5
U.S.C 553(b)(3)(B), for good cause, we
waive notice and comment procedures.
VI. Collection of Information
Requirement
This document does not impose any
information collection and
recordkeeping requirements.
Consequently, it need not be reviewed
by the Office of Management and
Budget under the authority of the
Paperwork Reduction Act of 1995 (44
U.S.C. 35).
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VII. Regulatory Impact Analysis
A. Overall Impact
We have examined the impacts of this
rule as required by Executive Order
12866 (September 1993, Regulatory
Planning and Review), the Regulatory
Flexibility Act (RFA) (September 19,
1980, Pub. L. 96–354), section 1102(b) of
the Social Security Act, the Unfunded
Mandates Reform Act of 1995 (Pub. L.
104–4), Executive Order 13132 on
Federalism, and the Congressional
Review Act (5 U.S.C. 804(2)).
Executive Order 12866 (as amended)
directs agencies to assess all costs and
benefits of available regulatory
alternatives and, if regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). A regulatory impact analysis
(RIA) must be prepared for major rules
with economically significant effects
($100 million or more in any 1 year).
For purposes of Title 5, United States
Code, section 804(2), we estimate that
this rulemaking is ‘‘economically
significant’’ as measured by the $100
million threshold, and hence also a
major rule under the Congressional
Review Act. Accordingly, we have
prepared a Regulatory Impact Analysis
that to the best of our ability presents
the costs and benefits of the rulemaking
on the 1,669 IPFs.
The updates to the IPF labor-related
share and wage indices are made in a
budget neutral manner and thus have no
effect on estimated costs to the Medicare
program. Therefore, the estimated
increased cost to the Medicare program
is due to the updated IPF payment rates,
which results in a $140 million increase
in payments, and the transition from 75
percent PPS/25 percent TEFRA
payments to 100 percent PPS payments,
which results in a $20 million decrease
in payments. The sunset of the stop-loss
provision has a minimal impact on IPF
payments in RY 2009. The distribution
of these impacts is summarized in Table
13. The effect of the updates described
in this notice result in an overall $120
million increase in payments from RY
2008 to RY 2009.
The RFA requires agencies to analyze
options for regulatory relief of small
businesses, if a rule has a significant
impact on a substantial number of small
entities. For purposes of the RFA, we
estimate that the great majority of IPFs
are small entities as that term is used in
the RFA (include small businesses,
nonprofit organizations, and small
governmental jurisdictions). The great
majority of hospitals and most other
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health care providers and suppliers are
small entities, either by being nonprofit
organizations or by meeting the SBA
definition of a small business (having
revenues of less than $6.5 million to
$31.5 million in any 1 year) (For details,
see the Small Business Administration’s
Interim final rule that set forth size
standards at 70 FR 72577, December 6,
2005.) Because we lack data on
individual hospital receipts, we cannot
determine the number of small
proprietary IPFs or the proportion of
IPFs’ revenue that is derived from
Medicare payments. Therefore, we
assume that all IPFs are considered
small entities. As shown in Table 13, we
estimate that the net revenue impact of
this notice on all IPFs is to increase
payments by about 2.5 percent. Thus,
we anticipate that this notice will not
have a significant impact on a
substantial number of small entities.
Medicare contractors are not considered
to be small entities. Individuals and
States are not included in the definition
of a small entity.
In addition, section 1102(b) of the Act
requires us to prepare a regulatory
impact analysis if a rule may have a
significant impact on the operations of
a substantial number of small rural
hospitals. This analysis must conform to
the provisions of section 604 of the
RFA. For purposes of section 1102(b) of
the Act, we define a small rural hospital
as a hospital that is located outside of
a metropolitan statistical area and has
fewer than 100 beds. With the exception
of hospitals located in certain New
England counties, for purposes of
section 1102(b) of the Act, we
previously defined a small rural
hospital as a hospital with fewer than
100 beds that is located outside of a
Metropolitan Statistical Area (MSA) or
New England County Metropolitan Area
(NECMA). However, under the new
labor market definitions, we no longer
employ NECMAs to define urban areas
in New England. For purposes of this
analysis, we now define a small rural
hospital as a hospital with fewer than
100 beds that is located outside of an
MSA. Therefore, the Secretary certifies
that this notice has a significant impact
on the operations of a substantial
number of small rural hospitals.
We have determined that this notice
will have a significant and positive
impact on substantial number of
hospitals classified as located in rural
areas. Since the impact on rural
hospitals is positive, we did not
consider alternatives to reduce burden
on these IPFs.
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
also requires that agencies assess
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anticipated costs and benefits before
issuing any rule whose mandates
require spending in any 1 year of $100
million in 1995 dollars, updated
annually for inflation. In 2008, that
threshold is approximately $130
million. This notice will not impose
spending costs on State, local, or tribal
governments in the aggregate, or by the
private sector, of $130 million Executive
Order 13132 establishes certain
requirements that an agency must meet
when it promulgates a proposed rule
(and subsequent final rule) that imposes
substantial direct requirement costs on
State and local governments, preempts
State law, or otherwise has Federalism
implications. We have reviewed this
notice under the criteria set forth in
Executive Order 13132 and have
determined that the notice will not have
any substantial impact on the rights,
roles, and responsibilities of State, local,
or tribal governments.
B. Anticipated Effects
adjustment within the first 5 years after
implementation of the payment system.
We may make a one-time prospective
adjustment to the Federal per diem and
ECT base rates to account for differences
between the historical data on costbased TEFRA payments (the basis of the
budget neutrality adjustment) and
estimates of TEFRA payments based on
actual data from the first year of the IPF
PPS. As part of that process, we will reassess the accuracy of all of the factors
impacting budget neutrality.
In addition, as discussed in section
IV.C.1. of this notice, we are using the
wage index and labor market share in a
budget neutral manner by applying a
wage index budget neutrality factor to
the Federal per diem and ECT base
rates. Thus, the budgetary impact to the
Medicare program by the update of the
IPF PPS will be due to the market basket
updates (see section III.B. of this notice)
and the planned update of the payment
blend discussed below.
2. Impacts on Providers
We discuss below the historical
background of the IPF PPS and the
impact of this notice on the Federal
Medicare budget and on IPFs.
1. Budgetary Impact
As discussed in the November 2004
and May 2006 IPF PPS final rules, we
applied a budget neutrality factor to the
Federal per diem and ECT base rates to
ensure that total estimated payments
under the IPF PPS in the
implementation period would equal the
amount that would have been paid if the
IPF PPS had not been implemented. The
budget neutrality factor includes the
following components: Outlier
adjustment, stop-loss adjustment, and
the behavioral offset. In accordance with
§ 412.424(c)(3)(ii), we will evaluate the
accuracy of the budget neutrality
To understand the impact of the
changes to the IPF PPS discussed in this
notice on providers, it is necessary to
compare estimated payments under the
IPF PPS rates and factors for RY 2009 to
estimated payments under the IPF PPS
rates and factors for RY 2008. The
estimated payments for RY 2008 are a
blend of: 25 percent of the facilityspecific TEFRA payment and 75 percent
of the IPF PPS payment with stop-loss
payment. The estimated payments for
the RY 2009 IPF PPS will be 100 percent
of the IPF PPS payment and the stoploss payment will no longer be applied.
We determined the percent change of
estimated RY 2009 IPF PPS payments to
estimated RY 2008 IPF PPS payments
for each category of IPFs. In addition,
for each category of IPFs, we have
included the estimated percent change
in payments resulting from the wage
index changes for the RY 2009 IPF PPS,
the market basket update to IPF PPS
payments, and the transition blend for
the RY 2009 IPF PPS payment and the
facility-specific TEFRA payment.
To illustrate the impacts of the final
RY 2009 changes in this update notice,
our analysis begins with a RY 2008
baseline simulation model based on FY
2006 IPF payments inflated to the
midpoint of RY 2008 using Global
Insight’s most recent forecast of the
market basket update (see section III.B.
of this notice); the estimated outlier
payments in RY 2008; the estimated
stop-loss payments in RY 2008; the
CBSA designations for IPFs based on
OMB’s MSA definitions after June 2003;
the FY 2007 pre-floor, pre-reclassified
hospital wage index; the RY 2008 labormarket share; and the RY 2008
percentage amount of the rural
adjustment. During the simulation, the
outlier payment is maintained at the
target of 2 percent of total PPS
payments.
Each of the following changes is
added incrementally to this baseline
model in order for us to isolate the
effects of each change:
• The FY 2008 pre-floor, prereclassified hospital wage index and RY
2009 final labor-related share.
• A market basket update of 3.2
percent resulting in an update to the IPF
PPS base rates.
• The transition to 100 percent IPF
PPS payments.
• The removal of the stop-loss
provision.
• Our final comparison illustrates the
percent change in payments from RY
2008 (that is, July 1, 2007 to June 30,
2008) to RY 2009 (that is, July 1, 2008
to June 30, 2009).
TABLE 13.—PROJECTED IMPACTS
Number of
facilities
CBSA wage
index and
labor share
(percent)
Market
basket
(percent)
Transition
blend
(percent)
Stop-loss
(percent)
Total
(percent)
(1)
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Facility by type
(2)
(3)
(4)
(5)
(6)
(7)
All Facilities ......................................................................
Urban ........................................................................
Rural .........................................................................
Urban unit .................................................................
Rural unit ..................................................................
Freestanding IPF By Type of Ownership:
Urban Psychiatric Hospitals:
Government ..............................................................
Non-Profit ..................................................................
For-Profit ...................................................................
Rural Psychiatric Hospitals:
Government ..............................................................
Non-Profit ..................................................................
For-Profit ...................................................................
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1,669
1,301
368
931
308
0.0
0.0
0.0
0.0
0.0
3.2
3.2
3.2
3.2
3.2
¥0.5
¥0.5
¥0.6
¥2.6
¥2.4
¥0.1
0.0
¥0.3
¥0.1
¥0.5
2.5
2.6
2.1
0.4
0.1
141
83
145
0.1
0.0
¥0.1
3.2
3.2
3.2
6.7
0.2
5.6
0.3
¥0.1
0.1
10.5
3.3
9.0
40
7
14
¥0.1
0.2
¥0.4
3.2
3.2
3.2
8.3
0.9
5.5
0.4
0.4
0.4
12.1
4.5
8.4
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TABLE 13.—PROJECTED IMPACTS
Facility by type
Number of
facilities
CBSA wage
index and
labor share
(percent)
Market
basket
(percent)
Transition
blend
(percent)
Stop-loss
(percent)
Total
(percent)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
By Teaching Status:
Non-teaching ....................................................................
Less than 10% interns and residents to beds ..........
10% to 30% interns and residents to beds ..............
More than 30% interns and residents to beds .........
By Region:
New England ............................................................
Mid-Atlantic ...............................................................
South Atlantic ............................................................
East North Central ....................................................
East South Central ...................................................
West North Central ...................................................
West South Central ..................................................
Mountain ...................................................................
Pacific .......................................................................
By Bed Size:
Psychiatric Hospitals:
Less than 12 beds .............................................
12 to 25 beds ....................................................
25 to 50 beds ....................................................
50 to 75 beds ....................................................
More than 75 beds ............................................
Psychiatric Units:
Less than 12 beds .............................................
12 to 25 beds ....................................................
25 to 50 beds ....................................................
50 to 75 beds ....................................................
More than 75 beds ............................................
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3. Results
Table 1 above displays the results of
our analysis. The table groups IPFs into
the categories listed below based on
characteristics provided in the Provider
of Services (POS) file, the IPF provider
specific file, and cost report data from
HCRIS:
• Facility Type
• Location
• Teaching Status Adjustment
• Census Region
• Size
The top row of the table shows the
overall impact on the 1,669 IPFs
included in the analysis.
In column 3, we present the effects of
the budget-neutral update to the laborrelated share and the wage index
adjustment under the CBSA geographic
area definitions announced by OMB in
June 2003. This is a comparison of the
simulated RY 2009 payments under the
FY 2008 hospital wage index under
CBSA classification and associated
labor-related share to the simulated RY
2008 payments under the FY 2007
hospital wage index under CBSA
classifications and associated laborrelated share. There is no projected
change in aggregate payments to IPFs, as
indicated in the first row of column 3.
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137
73
35
0.0
0.0
0.0
0.0
3.2
3.2
3.2
3.2
¥0.4
¥0.4
¥2.0
¥1.6
¥0.1
0.3
¥0.1
¥0.5
2.6
3.1
1.0
1.1
121
284
226
292
164
141
228
74
132
0.4
¥0.1
0.0
¥0.2
¥0.4
0.1
¥0.1
¥0.3
0.5
3.2
3.2
3.2
3.2
3.2
3.2
3.2
3.2
3.2
¥2.4
1.9
¥0.5
¥2.3
¥0.2
¥1.7
¥1.1
¥1.7
0.4
0.0
0.2
0.1
¥0.3
0.0
¥0.2
¥0.5
¥0.7
0.0
1.2
5.2
2.8
0.3
2.5
1.4
1.3
0.5
4.2
24
62
94
77
174
¥0.1
¥0.1
¥0.2
0.0
0.1
3.2
3.2
3.2
3.2
3.2
¥1.9
1.2
2.4
5.1
6.5
0.0
0.1
¥0.5
0.2
0.4
1.1
4.2
4.9
8.6
10.4
489
430
217
55
47
0.0
0.1
0.0
¥0.1
0.0
3.2
3.2
3.2
3.2
3.2
¥4.6
¥2.9
¥2.0
¥1.8
0.7
¥0.7
¥0.3
0.2
0.3
0.3
¥2.4
0.0
1.3
1.4
4.2
There would, however, be small
distributional effects among different
categories of IPFs. For example, rural
for-profit IPFs and IPFs located in the
East South Central region will
experience a 0.4 percent decrease in
payments. IPFs located in the Pacific
region will receive the largest increase
of 0.5 percent.
In column 4, we present the effects of
the market basket update to the IPF PPS
payments by applying the TEFRA and
PPS updates to payments under the
revised budget neutrality factor and
labor-related share and wage index
under CBSA classification. In the
aggregate this update is projected to be
a 3.2 percent increase in overall
payments to IPFs.
In column 5, we present the effects of
the payment change in transition blend
percentages to the final year of the
transition (TEFRA Rate Percentage = 0
percent, IPF PPS Federal Rate
Percentage = 100 percent) from the third
year of the transition (TEFRA Rate
Percentage = 25 percent, IPF PPS
Federal Rate Percentage = 75 percent) of
the IPF PPS under the revised budget
neutrality factor, labor-related share and
wage index under CBSA classification,
and TEFRA and PPS updates to RY
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2008. The overall aggregate effect, across
all hospital groups, is projected to be a
0.5 percent decrease in payments to
IPFs. There are distributional effects of
these changes among different
categories of IPFs. Government
psychiatric hospitals will receive the
largest increase, with rural government
hospitals receiving an 8.3 percent
increase and urban government
hospitals receiving a 6.7 percent
increase. In addition, psychiatric
hospitals with more than 75 beds will
receive a 6.5 percent increase.
Alternatively, psychiatric units with
fewer than 12 beds will receive the
largest decrease of 4.6 percent.
In column 6, we present the effects of
the removal of the stop-loss provision.
Stop-loss payments are no longer
applicable when payments are 100
percent IPF PPS payments. However, all
IPFs will receive an increase in the rates
of 0.39 percent. The overall aggregate
effect, across all hospital groups, is
projected to be a 0.1 percent decrease in
payments to IPFs. While stop-loss
payments were intended to be budget
neutral, we slightly underestimated the
percentage by which we needed to
decrease the Federal per diem base rate
in the implementation year. Therefore,
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the aggregate impact of removing the
stop-loss provision is a 0.1 percent
decrease in payments instead of 0.0
percent. There are distributional effects
of these changes among different
categories of IPFs. Rural freestanding
psychiatric hospitals will receive the
largest increases, with rural government
hospitals, rural non-profit hospitals, and
rural for-profit hospitals each receiving
a 0.4 percent increase. Alternatively,
psychiatric units with fewer than 12
beds and IPFs located in the Mountain
region will receive the largest decrease
of 0.7 percent.
Column 7 compares our estimates of
the changes reflected in this notice for
RY 2009, to our estimates of payments
for RY 2008 (without these changes).
This column reflects all RY 2009
changes relative to RY 2008 (as shown
in columns 3 through 6). The average
increase for all IPFs is approximately
2.5 percent. This increase includes the
effects of the market basket update
resulting in a 3.2 percent increase in
total RY 2009 payments, a 0.5 percent
decrease in RY 2009 payments for the
transition blend, and a 0.1 percent
decrease in RY 2009 payments for the
removal of the stop-loss provision.
Overall, the largest payment increase
is projected to be among government
IPFs. Rural government psychiatric
hospitals will receive a 12.1 percent
increase and urban government
psychiatric hospitals will receive a 10.5
percent increase. In addition,
psychiatric hospitals with more than 75
beds will receive a 10.4 percent
increase. Psychiatric units with fewer
than 12 beds will receive a 2.4 percent
decrease.
TABLE 14.—ESTIMATED PAYMENTS—
Continued
Dollars in
millions
Rate year
July
July
July
July
1,
1,
1,
1,
2009
2010
2011
2012
to
to
to
to
June
June
June
June
30,
30,
30,
30,
2010
2011
2012
2013
4,799
5,055
5,373
5,722
These estimates are based on the
current estimate of increases in the RPL
market basket as follows:
• 3.2 percent for RY 2009;
• 2.9 percent for RY 2010;
• 3.0 percent for RY 2011;
• 3.2 percent for RY 2012; and
• 3.2 percent for RY 2013.
We estimate that there would be a
change in fee-for-service Medicare
beneficiary enrollment as follows:
• ¥0.3 percent in RY 2009;
• 0.2 percent in RY 2010;
• 0.5 percent in RY 2011;
• 1.5 percent in RY 2012; and
• 2.5 percent in RY 2013.
5. Effect on Beneficiaries
Under the IPF PPS, IPFs will receive
payment based on the average resources
consumed by patients for each day. We
do not expect changes in the quality of
care or access to services for Medicare
beneficiaries under the RY 2009 IPF
PPS. In fact, we believe that access to
IPF services will be enhanced due to the
patient and facility level adjustment
factors, all of which are intended to
adequately reimburse IPFs for expensive
cases. Finally, the outlier policy is
intended to assist IPFs that experience
high-cost cases.
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C. Alternatives Considered
The statute does not specify an update
4. Effect on the Medicare Program
strategy for the IPF PPS and is broadly
Based on actuarial projections
written to give the Secretary discretion
resulting from our experience with other in establishing an update methodology.
PPSs, we estimate that Medicare
Therefore, we are updating the IPF PPS
spending (total Medicare program
similar to the update approach used in
payments) for IPF services over the next other hospital PPSs and as published in
5 years would be as follows:
the November 15, 2004, final rule. We
note that this notice does not initiate
TABLE 14.—ESTIMATED PAYMENTS
any policy changes with regard to the
IPF PPS; rather, it simply provides an
Dollars in
Rate year
update to the rates for RY 2009.
millions
Therefore, no other options were
July 1, 2008 to June 30, 2009
$4,584 considered.
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D. Accounting Statement
As required by OMB Circular A–4
(available at: https://
www.whitehouse.gov/omb/circulars/
a004/a-4.pdf), in Table 15 below, we
have prepared an accounting statement
showing the classification of the
expenditures associated with the
provisions of this notice. This table
provides our best estimate of the
increase in Medicare payments under
the IPF PPS as a result of the changes
presented in this notice based on the
data for 1,669 IPFs in our database. All
expenditures are classified as transfers
to Medicare providers (that is, IPFs).
TABLE 15.—ACCOUNTING STATEMENT:
CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM THE 2008 IPF
PPS RY TO THE 2009 IPF PPS RY
[in Millions]
Category
Annualized Monetized
Transfers.
From Whom To
Whom?
Transfers
$120.
Federal Government
To IPFs Medicare
Providers.
E. Conclusion
This notice does not initiate any
policy changes with regard to the IPF
PPS; rather, it simply provides an
update to the rates for RY 2009 using
established methodologies. In
accordance with the provisions of
Executive Order 12866, this rule was
previously reviewed by OMB.
(Catalog of Federal Domestic Assistance
Program No. 93.773, Medicare—Hospital
Insurance; and Program No. 93.774,
Medicare—Supplementary Medical
Insurance Program)
Dated: March 14, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare
& Medicaid Services.
Approved: April 4, 2008.
Michael O. Leavitt,
Secretary.
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BILLING CODE 4120–01–C
Submit written or electronic
comments on the collection of
information by July 7, 2008.
ADDRESSES: Submit electronic
comments on the collection of
information to https://
www.regulations.gov. Submit written
comments on the collection of
information to the Division of Dockets
Management (HFA–305), Food and Drug
Administration, 5630 Fishers Lane, rm.
1061, Rockville, MD 20852. All
comments should be identified with the
docket number found in brackets in the
heading of this document.
FOR FURTHER INFORMATION CONTACT:
Jonna Capezzuto, Office of the Chief
Information Officer (HFA–250), Food
and Drug Administration,5600 Fishers
Lane, Rockville, MD 20857, 301–827–
4659.
DATES:
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Food and Drug Administration
[Docket No. FDA–2008–N–0272]
Agency Information Collection
Activities; Proposed Collection;
Comment Request; Guidance for
Industry: Notification of a Health Claim
or Nutrient Content Claim Based on an
Authoritative Statement of a Scientific
Body
AGENCY:
Food and Drug Administration,
HHS.
sroberts on PROD1PC70 with NOTICES
ACTION:
Notice.
SUMMARY: The Food and Drug
Administration (FDA) is announcing an
opportunity for public comment on the
proposed collection of certain
information by the agency. Under the
Paperwork Reduction Act of 1995 (the
PRA), Federal agencies are required to
publish notice in the Federal Register
concerning each proposed collection of
information, including each proposed
extension of an existing collection of
information, and to allow 60 days for
public comment in response to the
notice. This notice solicits comments on
the collection of information associated
with the submission of notifications of
health claims or nutrient content claims
based on authoritative statements of
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Under the
PRA (44 U.S.C. 3501–3520), Federal
agencies must obtain approval from the
Office of Management and Budget
(OMB) for each collection of
information they conduct or sponsor.
‘‘Collection of information’’ is defined
in 44 U.S.C. 3502(3) and 5 CFR
1320.3(c) and includes agency requests
or requirements that members of the
public submit reports, keep records, or
provide information to a third party.
Section 3506(c)(2)(A) of the PRA (44
U.S.C. 3506(c)(2)(A)) requires Federal
agencies to provide a 60-day notice in
SUPPLEMENTARY INFORMATION:
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the Federal Register concerning each
proposed collection of information,
including each proposed extension of an
existing collection of information,
before submitting the collection to OMB
for approval. To comply with this
requirement, FDA is publishing notice
of the proposed collection of
information set forth in this document.
With respect to the following
collection of information, FDA invites
comments on these topics: (1) Whether
the proposed collection of information
is necessary for the proper performance
of FDA’s functions, including whether
the information will have practical
utility; (2) the accuracy of FDA’s
estimate of the burden of the proposed
collection of information, including the
validity of the methodology and
assumptions used; (3) ways to enhance
the quality, utility, and clarity of the
information to be collected; and (4)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques,
when appropriate, and other forms of
information technology.
Guidance for Industry: Notification of a
Health Claim or Nutrient Content Claim
Based on an Authoritative Statement of
a Scientific Body (OMB Control
Number 0910–0374)—Extension
Section 403(r)(2)(G) and (r)(3)(C) of
the Federal Food, Drug and Cosmetic
Act (the act) (21 U.S.C. 343(r)(2)(G) and
(r)(3)(C)), as amended by the FDA
E:\FR\FM\07MYN1.SGM
07MYN1
EN07MY08.059</GPH>
scientific bodies of the U.S.
Government.
[FR Doc. 08–1213 Filed 5–1–08; 4:00 pm]
25749
]]>Agencies
[Federal Register Volume 73, Number 89 (Wednesday, May 7, 2008)]
[Notices]
[Pages 25709-25749]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 08-1213]
[[Page 25709]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
[CMS-1401-N]
RIN 0938-AO92
Medicare Program; Inpatient Psychiatric Facilities Prospective
Payment System Payment Update for Rate Year Beginning July 1, 2008 (RY
2009)
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: This notice updates the prospective payment rates for Medicare
inpatient psychiatric hospital services provided by inpatient
psychiatric facilities (IPFs). These changes are applicable to IPF
discharges occurring during the rate year beginning July 1, 2008
through June 30, 2009.
DATES: Effective Date: The updated IPF prospective payment rates are
effective for discharges occurring on or after July 1, 2008 through
June 30, 2009.
FOR FURTHER INFORMATION CONTACT:
Dorothy Myrick or Jana Lindquist, (410) 786-4533 (for general
information).
Heidi Oumarou, (410) 786-7942 (for information regarding the market
basket and labor-related share).
Theresa Bean, (410) 786-2287 (for information regarding the regulatory
impact analysis).
Matthew Quarrick, (410) 786-9867 (for information on the wage index).
SUPPLEMENTARY INFORMATION:
Table of Contents
To assist readers in referencing sections contained in this
document, we are providing the following table of contents.
I. Background.
A. Annual Requirements for Updating the IPF PPS.
B. Overview of the Legislative Requirements of the IPF PPS.
C. IPF PPS-General Overview.
II. Transition Period for Implementation of the IPF PPS.
III. Updates to the IPF PPS for RY Beginning July 1, 2008.
A. Determining the Standardized Budget-Neutral Federal Per Diem
Base Rate.
1. Standardization of the Federal Per Diem Base Rate and
Electroconvulsive Therapy Rate.
2. Calculation of the Budget Neutrality Adjustment.
a. Outlier Adjustment.
b. Stop-Loss Provision Adjustment.
c. Behavioral Offset.
B. Update of the Federal Per Diem Base Rate and
Electroconvulsive Therapy Rate.
1. Market Basket for IPFs Reimbursed Under the IPF PPS.
a. Market Basket Index for the IPF PPS.
b. Overview of the RPL Market Basket.
2. Labor-Related Share.
3. IPFs Paid Based on a Blend of the Reasonable Cost-based
Payments.
IV. Update of the IPF PPS Adjustment Factors.
A. Overview of the IPF PPS Adjustment Factors.
B. Patient-Level Adjustments.
1. Adjustment for MS-DRG Assignment.
2. Payment for Comorbid Conditions.
3. Patient Age Adjustments.
4. Variable Per Diem Adjustments.
C. Facility-Level Adjustments.
1. Wage Index Adjustment.
a. Clarification of New England Deemed Counties.
b. Multi-campus-Wage Index Data Collection.
c. OMB Bulletins.
2. Adjustment for Rural Location.
3. Teaching Adjustment.
4. Cost of Living Adjustment for IPFs Located in Alaska and
Hawaii.
5. Adjustment for IPFs With a Qualifying Emergency Department
(ED).
D. Other Payment Adjustments and Policies.
1. Outlier Payments.
a. Update to the Outlier Fixed Dollar Loss Threshold Amount.
b. Statistical Accuracy of Cost-to-Charge Ratios.
2. Stop-Loss Provision.
V. Waiver of Proposed Rulemaking.
VI. Collection of Information Requirements.
VII. Regulatory Impact Analysis.
Addenda.
Acronyms
Because of the many terms to which we refer by acronym in this
notice, we are listing the acronyms used and their corresponding terms
in alphabetical order below:
BBRA Medicare, Medicaid and SCHIP [State Children's Health Insurance
Program] Balanced Budget Refinement Act of 1999, (Pub. L. 106-113).
CBSA Core-Based Statistical Area.
CCR Cost-to-charge ratio.
CMSA Consolidated Metropolitan Statistical Area.
DSM-IV-TR Diagnostic and Statistical Manual of Mental Disorders Fourth
Edition--Text Revision.
DRGs Diagnosis-related groups.
FY Federal fiscal year.
ICD-9-CM International Classification of Diseases, 9th Revision,
Clinical Modification.
IPFs Inpatient psychiatric facilities.
IRFs Inpatient rehabilitation facilities.
LTCHs Long-term care hospitals.
MedPAR Medicare provider analysis and review file.
MSA Metropolitan Statistical Area.
RY Rate Year.
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, (Pub. L. 97-
248).
I. Background
A. Annual Requirements for Updating the IPF PPS
In November 2004, we implemented the IPF PPS in a final rule that
appeared in the November 15, 2004 Federal Register (69 FR 66922). In
developing the IPF PPS, in order to ensure that the IPF PPS is able to
account adequately for each IPF's case-mix, we performed an extensive
regression analysis of the relationship between the per diem costs and
certain patient and facility characteristics to determine those
characteristics associated with statistically significant cost
differences on a per diem basis. For characteristics with statistically
significant cost differences, we used the regression coefficients of
those variables to determine the size of the corresponding payment
adjustments.
In that final rule, we explained that we believe it is important to
delay updating the adjustment factors derived from the regression
analysis until we have IPF PPS data that includes as much information
as possible regarding the patient-level characteristics of the
population that each IPF serves. Therefore, we indicated that we did
not intend to update the regression analysis and recalculate the
Federal per diem base rate and the patient- and facility-level
adjustments until we complete that analysis. Until that analysis is
complete, we stated our intention to publish a notice in the Federal
Register each spring to update the IPF PPS (71 FR 27041).
Updates to the IPF PPS as specified in 42 CFR 412.428 include the
following:
A description of the methodology and data used to
calculate the updated Federal per diem base payment amount.
The rate of increase factor as described in Sec.
412.424(a)(2)(iii), which is based on the excluded hospital with
capital market basket under the update methodology of section
1886(b)(3)(B)(ii) of the Act for each year.
For discharges occurring on or after July 1, 2006, the
rate of increase factor for the Federal portion of the IPF's payment,
which is based on the rehabilitation, psychiatric, and long-term care
(RPL) market basket.
For discharges occurring on or after October 1, 2005, the
rate of increase factor for the reasonable cost portion of the IPF's
payment, which is based on the 2002-based excluded hospital market
basket.
The best available hospital wage index and information
regarding
[[Page 25710]]
whether an adjustment to the Federal per diem base rate, is needed to
maintain budget neutrality.
Updates to the fixed dollar loss threshold amount in order
to maintain the appropriate outlier percentage.
Description of the ICD-9-CM coding and DRG classification
changes discussed in the annual update to the hospital inpatient
prospective payment system (IPPS) regulations.
Update to the electroconvulsive therapy (ECT) payment by a
factor specified by CMS.
Update to the national urban and rural cost-to-charge
ratio medians and ceilings.
Update to the cost of living adjustment factors for IPFs
located in Alaska and Hawaii, if appropriate.
Our most recent annual update occurred in the May 2007 IPF PPS
notice (72 FR 25602) that set forth updates to the IPF PPS payment
rates for RY 2008.
This notice does not initiate any policy changes with regard to the
IPF PPS; rather, it simply provides an update to the rates for RY 2009
(that is, the prospective payment rates applicable for discharges
beginning July 1, 2008 through June 30, 2009). In establishing these
payment rates, we update the IPF per diem payment rates that were
published in the May 2007 IPF PPS notice in accordance with our
established policies.
B. Overview of the Legislative Requirements for the IPF PPS
Section 124 of the Medicare, Medicaid, and SCHIP (State Children's
Health Insurance Program) Balanced Budget Refinement Act of 1999, (Pub.
L. 106-113) (BBRA) required implementation of the IPF PPS.
Specifically, section 124 of the BBRA mandated that the Secretary
develop a per diem PPS for inpatient hospital services furnished in
psychiatric hospitals and psychiatric units that includes an adequate
patient classification system that reflects the differences in patient
resource use and costs among psychiatric hospitals and psychiatric
units.
Section 405(g)(2) of the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA) (Pub. L. 108-173) extended the IPF
PPS to distinct part psychiatric units of critical access hospitals
(CAHs).
To implement these provisions, we published various proposed and
final rules in the Federal Register. For more information regarding
these rules, see the CMS Web sites https://www.cms.hhs.gov/
InpatientPsychFacilPPS/ and https://www.cms.hhs.gov/
InpatientpsychfacilPPS/02_regulations.asp.
C. IPF PPS--General Overview
The November 2004 IPF PPS final rule (69 FR 66922) established the
IPF PPS, as authorized under section 124 of the BBRA and codified at
subpart N of part 412 of the Medicare regulations. The November 2004
IPF PPS final rule set forth the per diem Federal rates for the
implementation year (that is, the 18-month period from January 1, 2005
through June 30, 2006) that provided payment for the inpatient
operating and capital costs to IPFs for covered psychiatric services
they furnish (that is, routine, ancillary, and capital costs), but not
costs of approved educational activities, bad debts, and other services
or items that are outside the scope of the IPF PPS. Covered psychiatric
services include services for which benefits are provided under the
fee-for-service Part A (Hospital Insurance Program) Medicare program.
The IPF PPS established the Federal per diem base rate for each
patient day in an IPF derived from the national average daily routine
operating, ancillary, and capital costs in IPFs in FY 2002. The average
per diem cost was updated to the midpoint of the first year under the
IPF PPS, standardized to account for the overall positive effects of
the IPF PPS payment adjustments, and adjusted for budget neutrality.
The Federal per diem payment under the IPF PPS is comprised of the
Federal per diem base rate described above and certain patient- and
facility-level payment adjustments that were found in the regression
analysis to be associated with statistically significant per diem cost
differences.
The patient-level adjustments include age, DRG assignment,
comorbidities, and variable per diem adjustments to reflect higher per
diem costs in the early days of an IPF stay. Facility-level adjustments
include adjustments for the IPF's wage index, rural location, teaching
status, a cost of living adjustment for IPFs located in Alaska and
Hawaii, and presence of a qualifying emergency department (ED).
The IPF PPS provides additional payments for: Outlier cases; stop-
loss protection (which is applicable only during the IPF PPS transition
period); interrupted stays; and a per treatment adjustment for patients
who undergo ECT.
A complete discussion of the regression analysis appears in the
November 2004 IPF PPS final rule (69 FR 66933 through 66936).
Section 124 of BBRA does not specify an annual update rate strategy
for the IPF PPS and is broadly written to give the Secretary discretion
in establishing an update methodology. Therefore, in the November 2004
IPF PPS final rule (69 FR 66966), we implemented the IPF PPS using the
following update strategy--(1) calculate the final Federal per diem
base rate to be budget neutral for the 18-month period of January 1,
2005 through June 30, 2006; (2) use a July 1 through June 30 annual
update cycle; and (3) allow the IPF PPS first update to be effective
for discharges on or after July 1, 2006 through June 30, 2007.
II. Transition Period for Implementation of the IPF PPS
In the November 2004 IPF PPS final rule, we established Sec.
412.426 to provide for a 3-year transition period from reasonable cost-
based reimbursement to full prospective payment for IPFs. The purpose
of the transition period is to allow existing IPFs time to adjust their
cost structures and to integrate the effects of changing to the IPF
PPS.
New IPFs, as defined in Sec. 412.426(c), are paid 100 percent of
the Federal per diem payment amount. For those IPFs that are
transitioning to the new system, payment is based on an increasing
percentage of the PPS payment and a decreasing percentage of each IPF's
facility-specific Tax Equity and Fiscal Responsibility Act of 1982
(TEFRA) reimbursement rate.
Table 1.--IPF PPS Transition Blend Factors
----------------------------------------------------------------------------------------------------------------
IPF PPS
Transition Year Cost reporting periods TEFRA rate federal rate
beginning on or after percentage percentage
----------------------------------------------------------------------------------------------------------------
1............................................. January 1, 2005................ 75 25
2............................................. January 1, 2006................ 50 50
3............................................. January 1, 2007................ 25 75
[[Page 25711]]
January 1, 2008................. 0 100
----------------------------------------------------------------------------------------------------------------
Changes to the blend percentages occur at the beginning of an IPF's
cost reporting period. However, regardless of when an IPF's cost
reporting year begins, the payment update will be effective for
discharges occurring on or after July 1, 2008 through June 30, 2009.
IPFs with cost reporting periods beginning January 1, 2008 will have
completed the transition period and will receive 100 percent IPF PPS
payments. Other IPFs with cost reporting periods beginning after
January 1, 2008, during 2008, will also begin to receive 100 percent
IPF PPS payments. This means that beginning January 1, 2009, all IPFs
will receive 100 percent IPF PPS payments and the IPF PPS transition
period will have ended.
For RY 2009, the transition period established in the November 2004
IPF PPS final rule will no longer be applied.
III. Updates to the IPF PPS for RY Beginning July 1, 2008
The Federal per diem base rate is used as the standard payment per
day under the IPF PPS and is adjusted by the applicable wage index
factor and the patient- and facility-level adjustments that are
applicable to the IPF stay. A detailed explanation of how we calculated
the average per diem cost appears in the November 2004 IPF PPS final
rule (69 FR 66926).
A. Determining the Standardized Budget-Neutral Federal Per Diem Base
Rate
Section 124(a)(1) of the BBRA requires that we implement the IPF
PPS in a budget neutral manner. In other words, the amount of total
payments under the IPF PPS, including any payment adjustments, must be
projected to be equal to the amount of total payments that would have
been made if the IPF PPS were not implemented. Therefore, we calculated
the budget-neutrality factor by setting the total estimated IPF PPS
payments to be equal to the total estimated payments that would have
been made under the TEFRA methodology had the IPF PPS not been
implemented.
Under the IPF PPS methodology, we calculated the final Federal per
diem base rate to be budget neutral during the IPF PPS implementation
period (that is, the 18-month period from January 1, 2005 through June
30, 2006) using a July 1 update cycle. We updated the average cost per
day to the midpoint of the IPF PPS implementation period (that is,
October 1, 2005), and this amount was used in the payment model to
establish the budget-neutrality adjustment.
A step-by-step description of the methodology used to estimate
payments under the TEFRA payment system appears in the November 2004
IPF PPS final rule (69 FR 66926).
1. Standardization of the Federal Per Diem Base Rate and
Electroconvulsive Therapy Rate
In the November 2004 IPF PPS final rule, we describe how we
standardized the IPF PPS Federal per diem base rate in order to account
for the overall positive effects of the IPF PPS payment adjustment
factors. To standardize the IPF PPS payments, we compared the IPF PPS
payment amounts calculated from the FY 2002 Medicare Provider Analysis
and Review (MedPAR) file to the projected TEFRA payments from the FY
2002 cost report file updated to the midpoint of the IPF PPS
implementation period (that is, October 2005). The standardization
factor was calculated by dividing total estimated payments under the
TEFRA payment system by estimated payments under the IPF PPS. The
standardization factor was calculated to be 0.8367.
As described in detail in the May 2006 IPF PPS final rule (71 FR
27045), in reviewing the methodology used to simulate the IPF PPS
payments used for the November 2004 IPF PPS final rule, we discovered
that due to a computer code error, total IPF PPS payments were
underestimated by about 1.36 percent. Since the IPF PPS payment total
should have been larger than the estimated figure, the standardization
factor should have been smaller (0.8254 vs. 0.8367). In turn, the
Federal per diem base rate and the ECT rate should have been reduced by
0.8254 instead of 0.8367.
To resolve this issue, in RY 2007, we amended the Federal per diem
base rate and the ECT payment rate prospectively. Using the
standardization factor of 0.8254, the average cost per day was
effectively reduced by 17.46 percent (100 percent minus 82.54 percent =
17.46 percent).
2. Calculation of the Budget Neutrality Adjustment
To compute the budget neutrality adjustment for the IPF PPS, we
separately identified each component of the adjustment, that is, the
outlier adjustment, stop-loss adjustment, and behavioral offset.
A complete discussion of how we calculate each component of the
budget neutrality adjustment appears in the November 2004 IPF PPS final
rule (69 FR 66932 through 66933) and in the May 2006 IPF PPS final rule
(71 FR 27044 through 27046).
a. Outlier Adjustment
Since the IPF PPS payment amount for each IPF includes applicable
outlier amounts, we reduced the standardized Federal per diem base rate
to account for aggregate IPF PPS payments estimated to be made as
outlier payments. The outlier adjustment was calculated to be 2
percent. As a result, the standardized Federal per diem base rate was
reduced by 2 percent to account for projected outlier payments.
b. Stop-Loss Provision Adjustment
As explained in the November 2004 IPF PPS final rule, we provided a
stop-loss payment during the transition from cost-based reimbursement
to the per diem payment system to ensure that an IPF's total PPS
payments were no less than a minimum percentage of their TEFRA payment,
had the IPF PPS not been implemented. We reduced the standardized
Federal per diem base rate by the percentage of aggregate IPF PPS
payments estimated to be made for stop-loss payments. As a result, the
standardized Federal per diem base rate was reduced by 0.39 percent to
account for stop-loss payments. Since the transition will be completed
for RY 2009, for cost reporting periods beginning on or after January
1, 2008, IPFs will be paid 100 percent PPS and, therefore, the stop
loss provision will no longer be applicable. We indicated in the
November 2004 IPF PPS final rule that we would remove this 0.39 percent
adjustment to the Federal per diem base rate after the transition (69
FR 66932). Therefore, for RY 2009, the Federal per diem base rate and
ECT rates will be increased by 0.39 percent.
[[Page 25712]]
c. Behavioral Offset
As explained in the November 2004 IPF PPS final rule,
implementation of the IPF PPS may result in certain changes in IPF
practices especially with respect to coding for comorbid medical
conditions. As a result, Medicare may make higher payments than assumed
in our calculations. Accounting for these effects through an adjustment
is commonly known as a behavioral offset.
Based on accepted actuarial practices and consistent with the
assumptions made in other PPSs, we assumed in determining the
behavioral offset that IPFs would regain 15 percent of potential
``losses'' and augment payment increases by 5 percent. We applied this
actuarial assumption, which is based on our historical experience with
new payment systems, to the estimated ``losses'' and ``gains'' among
the IPFs. The behavioral offset for the IPF PPS was calculated to be
2.66 percent. As a result, we reduced the standardized Federal per diem
base rate by 2.66 percent to account for behavioral changes. As
indicated in the November 2004 IPF PPS final rule, we do not plan to
change adjustment factors or projections, including the behavioral
offset, until we analyze IPF PPS data. At that time, we will re-assess
the accuracy of the behavioral offset along with the other factors
impacting budget neutrality.
If we find that an adjustment is warranted, the percent difference
may be applied prospectively to the established PPS rates to ensure the
rates accurately reflect the payment level intended by the statute. In
conducting this analysis, we will be interested in the extent to which
improved documentation and coding of patients' principal and other
diagnoses, which may not reflect real increases in underlying resource
demands, has occurred under the PPS.
B. Update of the Federal Per Diem Base Rate and Electroconvulsive
Therapy Rate
1. Market Basket for IPFs Reimbursed Under the IPF PPS
As described in the November 2004 IPF PPS final rule, the average
per diem cost was updated to the midpoint of the implementation year
(69 FR 66931). This updated average per diem cost of $724.43 was
reduced by 17.46 percent to account for standardization to projected
TEFRA payments for the implementation period, by 2 percent to account
for outlier payments, by 0.39 percent to account for stop-loss
payments, and by 2.66 percent to account for the behavioral offset. The
Federal per diem base rate in the implementation year was $575.95, the
per diem base rate for RY 2007 was $595.09, and the per diem base rate
for RY 2008 was $614.99.
Applying the market basket increase of 3.2 percent, the stop-loss
adjustment of 0.39 percent, and the wage index budget neutrality factor
of 1.0010 yields a Federal per diem base rate of $637.78 for RY 2009.
Similarly, applying the market basket increase, stop-loss adjustment,
and wage index budget neutrality factor to the RY 2008 ECT rate yields
an ECT rate of $274.58 for RY 2009.
a. Market Basket Index for the IPF PPS
The market basket index that was used to develop the IPF PPS was
the excluded hospital with capital market basket. The market basket was
based on 1997 Medicare cost report data and included data for Medicare
participating IPFs, inpatient rehabilitation facilities (IRFs), long-
term care hospitals (LTCHs), cancer, and children's hospitals.
We are presently unable to create a separate market basket
specifically for psychiatric hospitals due to the following two
reasons: (1) There is a very small sample size for free-standing
psychiatric facilities; and (2) there are limited expense data for some
categories on the free-standing psychiatric cost reports (for example,
approximately 4 percent of free-standing psychiatric facilities
reported contract labor cost data for FY 2002). However, since all
IRFs, LTCHs, and IPFs are now paid under a PPS, we are updating PPS
payments made under the IRF PPS, the IPF PPS, and the LTCH PPS, using a
market basket reflecting the operating and capital cost structures for
IRFs, IPFs, and LTCHs (hereafter referred to as the rehabilitation,
psychiatric, long-term care (RPL) market basket).
We have excluded cancer and children's hospitals from the RPL
market basket because their payments are based entirely on reasonable
costs subject to rate-of-increase limits established under the
authority of section 1886(b) of the Act, which are implemented in
regulations at Sec. 413.40. They are not reimbursed under a PPS. Also,
the FY 2002 cost structures for cancer and children's hospitals are
noticeably different than the cost structures of the IRFs, IPFs, and
LTCHs.
The services offered in IRFs, IPFs, and LTCHs are typically more
labor-intensive than those offered in cancer and children's hospitals.
Therefore, the compensation cost weights for IRFs, IPFs, and LTCHs are
larger than those in cancer and children's hospitals. In addition, the
depreciation cost weights for IRFs, IPFs, and LTCHs are noticeably
smaller than those for cancer and children's hospitals.
A complete discussion of the RPL market basket appears in the May
2006 IPF PPS final rule (71 FR 27046 through 27054).
b. Overview of the RPL Market Basket
The RPL market basket is a fixed weight, Laspeyres-type price
index. A market basket is described as a fixed-weight index because it
answers the question of how much it would cost, at another time, to
purchase the same mix of goods and services purchased to provide
hospital services in a base period. The effects on total expenditures
resulting from changes in the quantity or mix of goods and services
(intensity) purchased subsequent to the base period are not measured.
In this manner, the market basket measures only pure price change. Only
when the index is rebased would the quantity and intensity effects be
captured in the cost weights. Therefore, we rebase the market basket
periodically so that cost weights reflect changes in the mix of goods
and services that hospitals purchase (hospital inputs) to furnish
patient care between base periods.
The terms rebasing and revising, while often used interchangeably,
actually denote different activities. Rebasing means moving the base
year for the structure of costs of an input price index (for example,
shifting the base year cost structure from FY 1997 to FY 2002).
Revising means changing data sources, methodology, or price proxies
used in the input price index. In 2006, we rebased and revised the
market basket used to update the IPF PPS. Table 2 below sets forth the
completed FY 2002-based RPL market basket including the cost
categories, weights, and price proxies.
[[Page 25713]]
Table 2.--FY 2002-Based RPL Market Basket Cost Categories, Weights, and Proxies
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 2002-based
RPL market
Expense categories basket cost FY 2002-based RPL market basket price proxies
weight
--------------------------------------------------------------------------------------------------------------------------------------------------------
TOTAL...................................... 100.000
Compensation............................... 65.877
Wages and Salaries *................... 52.895 ECI-Wages and Salaries, Civilian Hospital Workers.
Employee Benefits *.................... 12.982 ECI-Benefits, Civilian Hospital Workers.
Professional Fees, Non-Medical 1A*......... 2.892 ECI-Compensation for Professional & Related occupations.
Utilities.................................. 0.656
Electricity............................ 0.351 PPI-Commercial Electric Power.
Fuel Oil, Coal, etc.................... 0.108 PPI-Commercial Natural Gas.
Water and Sewage....................... 0.197 CPI-U--Water & Sewage Maintenance.
Professional Liability Insurance........... 1.161 CMS Professional Liability Premium Index.
All Other Products and Services 19.265
All Other Products 13.323
Pharmaceuticals.................... 5.103 PPI Prescription Drugs.
Food: Direct Purchases............. 0.873 PPI Processed Foods & Feeds.
Food: Contract Service............. 0.620 CPI-U Food Away From Home.
Chemicals.......................... 1.100 PPI Industrial Chemicals.
Medical Instruments................ 1.014 PPI Medical Instruments & Equipment.
Photographic Supplies.............. 0.096 PPI Photographic Supplies.
Rubber and Plastics................ 1.052 PPI Rubber & Plastic Products.
Paper Products..................... 1.000 PPI Converted Paper & Paperboard Products.
Apparel............................ 0.207 PPI Apparel.
Machinery and Equipment............ 0.297 PPI Machinery & Equipment.
Miscellaneous Products **.......... 1.963 PPI Finished Goods less Food & Energy.
All Other Services 5.942
Telephone.......................... 0.240 CPI-U Telephone Services.
Postage............................ 0.682 CPI-U Postage.
All Other: Labor Intensive *....... 2.219 ECI-Compensation for Private Service Occupations.
All Other: Non-labor Intensive..... 2.800 CPI-U All Items.
Capital-Related Costs *** 10.149
Depreciation 6.186
Fixed Assets....................... 4.250 Boeckh Institutional Construction 23-year useful life.
Movable Equipment.................. 1.937 WPI Machinery & Equipment 11-year useful life.
Interest Costs 2.775
Nonprofit.............................. 2.081 Average yield on domestic municipal bonds (Bond Buyer 20 bonds) vintage-weighted (23
years).
For Profit............................. 0.694 Average yield on Moody's Aaa bond vintage-weighted (23 years).
Other Capital-Related Costs................ 1.187 CPI-U Residential Rent.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Labor-related.
** Blood and blood-related products is included in miscellaneous products.
*** A portion of capital costs (0.46) are labor-related.
Note: Due to rounding, weights may not sum to total.
For RY 2009, we evaluated the price proxies using the criteria of
reliability, timeliness, availability, and relevance. Reliability
indicates that the index is based on valid statistical methods and has
low sampling variability. Timeliness implies that the proxy is
published regularly, preferably at least once a quarter. Availability
means that the proxy is publicly available. Finally, relevance means
that the proxy is applicable and representative of the cost category
weight to which it is applied. The Consumer Price Indexes (CPIs),
Producer Price Indexes (PPIs), and Employment Cost Indexes (ECIs) used
as proxies in this market basket meet these criteria.
We note that the proxies are the same as those used for the FY
1997-based excluded hospital with capital market basket. Because these
proxies meet our criteria of reliability, timeliness, availability, and
relevance, we believe they continue to be the best measure of price
changes for the cost categories. For further discussion on the FY 1997-
based excluded hospital with capital market basket, see the August 1,
2002 IPPS final rule (67 FR at 50042).
The RY 2009 (that is, beginning July 1, 2008) update for the IPF
PPS using the FY 2002-based RPL market basket and Global Insight's 1st
quarter 2008 forecast for the market basket components is 3.2 percent.
This includes increases in both the operating section and the capital
section for the 12-month RY period (that is, July 1, 2008 through June
30, 2009). Global Insight, Inc. is a nationally recognized economic and
financial forecasting firm that contracts with CMS to forecast the
components of the market baskets.
2. Labor-Related Share
Due to the variations in costs and geographic wage levels, we
believe that payment rates under the IPF PPS should continue to be
adjusted by a geographic wage index. This wage index applies to the
labor-related portion of the Federal per diem base rate, hereafter
referred to as the labor-related share.
The labor-related share is determined by identifying the national
average proportion of operating costs that are related to, influenced
by, or vary with the local labor market. Using our current definition
of labor-related, the labor-related share is the sum of the relative
importance of wages and salaries, fringe benefits, professional fees,
labor-intensive services, and a portion of the capital share from an
appropriate market basket. We used the FY 2002-based RPL market basket
cost weights
[[Page 25714]]
relative importance to determine the labor-related share for the IPF
PPS.
The labor-related share for RY 2009 is the sum of the RY 2009
relative importance of each labor-related cost category, and reflects
the different rates of price change for these cost categories between
the base year (FY 2002) and RY 2009. The sum of the relative importance
for the RY 2009 operating costs (wages and salaries, employee benefits,
professional fees, and labor-intensive services) is 71.681, as shown in
Table 3 below. The portion of capital that is influenced by the local
labor market is estimated to be 46 percent, which is the same
percentage used in the FY 1997-based IRF and IPF payment systems.
Since the relative importance for capital is 8.586 percent of the
FY 2002-based RPL market basket in RY 2009, we are taking 46 percent of
8.586 percent to determine the labor-related share of capital for RY
2009. The result is 3.950 percent, which we added to 71.681 percent for
the operating cost amount to determine the total labor-related share
for RY 2009. Thus, the labor-related share that we are using for IPF
PPS in RY 2009 is 75.631 percent. Table 3 below shows the RY 2009
labor-related share using the FY 2002-based RPL market basket. We note
that this labor-related share is determined by using the same
methodology as employed in calculating all previous IPF labor-related
shares.
A complete discussion of the IPF labor-related share methodology
appears in the November 2004 IPF PPS final rule (69 FR 66952 through
66954).
Table 3.--Total Labor-Related Share--Relative Importance for RY 2009
------------------------------------------------------------------------
FY 2002-based FY 2002-based
RPL Market RPL Market
Basket Relative Basket Relative
Cost category Importance Importance
(Percent) RY (Percent) RY
2008 * 2009 **
------------------------------------------------------------------------
Wages and salaries.................... 52.588 52.645
Employee benefits..................... 14.127 14.004
Professional fees..................... 2.907 2.895
All other labor-intensive services.... 2.145 2.137
SUBTOTAL.......................... 71.767 71.681
---------------------------------
Labor-related share of capital costs 4.021 3.950
(0.46)...............................
=================================
TOTAL............................. 75.788 75.631
------------------------------------------------------------------------
* Based on 2007 1st Quarter forecast.
** Based on 2008 1st Quarter forecast.
3. IPFs Paid Based on a Blend of the Reasonable Cost-Based Payments
As stated in the FY 2006 IPPS final rule (70 FR 47399), for IPFs
that are transitioning to the fully Federal prospective payment rate,
we will continue using the rebased and revised FY 2002-based excluded
hospital market basket to update the reasonable cost-based portion of
their payments.
For RY 2009, all IPFs will have fully transitioned to PPS payment
and therefore, be paid based on 100 percent IPF PPS. The reasonable
cost-based payment which is subject to TEFRA limits will no longer be
applied.
IV. Update of the IPF PPS Adjustment Factors
A. Overview of the IPF PPS Adjustment Factors
The IPF PPS payment adjustments were derived from a regression
analysis of 100 percent of the FY 2002 MedPAR data file, which
contained 483,038 cases. We used the same results of this regression
analysis to implement the November 2004 and May 2006 IPF PPS final
rules. While we have since used more recent claims data to set the
fixed dollar loss threshold amount, we use the same results of this
regression analysis to update the IPF PPS for RY 2008 as well as RY
2009.
As previously stated, we do not plan to update the regression
analysis until we analyze IPF PPS data. We plan to monitor claims and
payment data independently from cost report data to assess issues, or
whether changes in case-mix or payment shifts have occurred between
free standing governmental, non-profit and private psychiatric
hospitals, and psychiatric units of general hospitals, and other issues
of importance to psychiatric facilities.
A complete discussion of the data file used for the regression
analysis appears in the November 2004 IPF PPS final rule (69 FR 66935
through 66936).
B. Patient-Level Adjustments
In the May 2006 IPF PPS final rule (71 FR 27040) for RY 2007 and in
the May 2007 IPF PPS notice (72 FR 25602) for RY 2008, we provided
payment adjustments for the following patient-level characteristics:
DRG assignment of the patient's principal diagnosis; selected
comorbidities; patient age; and the variable per diem adjustments. As
previously stated in the November 2004 IPF PPS final rule, we do not
intend to update the adjustment factors derived from the regression
analysis until we analyze IPF PPS data that include as much information
as possible regarding the patient-level characteristics of the
population that each IPF serves.
1. Adjustment for MS-DRG Assignment
The IPF PPS includes payment adjustments for the psychiatric DRG
assigned to the claim based on each patient's principal diagnosis. In
the May 4, 2007 IPF PPS update notice (72 FR 25602), we explained that
the IPF PPS includes 15 diagnosis-related group (DRG) adjustment
factors. The adjustment factors were expressed relative to the most
frequently reported psychiatric DRG in FY 2002, that is, DRG 430
(psychoses). The coefficient values and adjustment factors were derived
from the regression analysis.
In accordance with Sec. 412.27(a), payment under the IPF PPS is
conditioned on IPFs admitting ``only patients whose admission to the
unit is required for active treatment, of an intensity that can be
provided appropriately only in an inpatient hospital setting, of a
psychiatric principal diagnosis that is listed in the Fourth Edition,
Text Revision of the American Psychiatric Association's Diagnostic and
Statistical Manual, (DSM-IV-TR) or in Chapter Five (``Mental
Disorders'') of the
[[Page 25715]]
International Classification of Diseases, Ninth Revision, Clinical
Modification [(ICD-9-CM)].'' IPF claims with a principal diagnosis
included in Chapter Five of the ICD-9-CM or the DSM-IV-TR will be paid
the Federal per diem base rate under the IPF PPS, and all other
applicable adjustments, including any applicable DRG adjustment.
Psychiatric principal diagnoses that do not group to one of the 15
designated DRGs still receive the Federal per diem base rate and all
other applicable adjustments, but the payment would not include a DRG
adjustment.
The Standards for Electronic Transaction final rule published in
the Federal Register on August 17, 2000 (65 FR 50312) adopted the ICD-
9-CM as the designated code set for reporting diseases, injuries,
impairments, other health related problems, their manifestations, and
causes of injury, disease, impairment, or other health related
problems. Therefore, we use the ICD-9-CM as the designated code set for
the IPF PPS.
We believe that it is important to maintain the same diagnostic
coding and DRG classification for IPFs that are used under the IPPS for
providing the same psychiatric care. Therefore, when the IPF PPS was
implemented for cost reporting periods beginning on or after January 1,
2005, we adopted the same diagnostic code set and DRG patient
classification system (that is, the CMS DRGs) that was utilized at the
time under the hospital inpatient prospective payment system (IPPS).
Since the inception of the IPF PPS, the DRGs used as the patient
classification system under the IPF PPS have corresponded exactly with
the CMS DRGs applicable under the IPPS for acute care hospitals.
Every year, changes to the ICD-9-CM coding system are addressed in
the IPPS proposed and final rules. The changes to the codes are
effective October 1 of each year and must be used by acute care
hospitals under the IPPS to report diagnostic and procedure
information. The IPF PPS has always incorporated those ICD-9-CM coding
changes made in the annual IPPS update. The IPF PPS announces the
changes in a change request, at the same time the coding changes to
IPPS and LTCH PPS are announced. Those ICD-9-CM coding changes are also
published in the next IPF PPS RY update, in either the proposed and
final rules, or in an update notice.
As part of CMS' effort to better recognize resource use and the
severity of illness among patients, CMS adopted the new Medicare
Severity diagnosis related groups (MS-DRGs) for the IPPS in the FY 2008
IPPS final rule with comment period (72 FR 47130). By better accounting
for patients' severity of illness in Medicare payment rates, the MS-
DRGs encourage hospitals to improve their coding and documentation of
patient diagnoses. The MS-DRGs, which are based on the CMS DRGs,
represent a significant increase in the number of DRGs (from 538 to
745, an increase of 207). For a full description of the development and
implementation of the MS-DRGs, see the FY 2008 IPPS final rule with
comment period (72 FR 47141 through 47175). Also see Transmittal 1374
(change request 5748), dated November 7, 2007, for the ICD-9-CM coding
changes.
All of the ICD-9-CM coding changes are reflected in the FY 2008
GROUPER, Version 25.0, effective for IPPS discharges occurring on or
after October 1, 2007 through September 30, 2008. The GROUPER Version
25.0 software package assigns each case to a DRG on the basis of the
diagnosis and procedure codes and demographic information (that is age,
sex, and discharge status). The Medicare Code Editor (MCE) 24.0 uses
the new ICD-9-CM codes to validate coding for IPPS discharges on or
after October 1, 2007. For additional information on the GROUPER
Version 25.0 and MCE 24.0, see Transmittal 1374, dated November 7,
2007. The IPF PPS has always used the same GROUPER and Code Editor as
the IPPS. Therefore, the ICD-9-CM changes, which were reflected in the
GROUPER Version 25.0 and MCE 24.0 on October 1, 2007, also became
effective for the IPF PPS for discharges occurring on or after October
1, 2007.
The impact of the new MS-DRGs on the IPF PPS is negligible. Mapping
the current DRGs to the MS-DRGs, there are now 17 MS-DRGs, instead of
the original 15, for which the IPF PPS provides an adjustment. In
addition, although the code set is updated, the same associated
adjustment factors apply now that have been in place since
implementation of the IPF PPS, with one exception that is unrelated to
the update to the codes. When DRGs 521 and 522 were consolidated into
MS-DRG 895, we carried over the adjustment factor of 1.02 from DRG 521
to the newly consolidated MS-DRG. This was done to reflect the higher
claims volume under DRG 521, with more than eight times the number of
claims than billed under DRG 522. The updated codes, which were
effective October 1, 2007, must be used to report diagnostic or
procedure information on IPF PPS claims. These updates are reflected in
Table 4.
The official version of the ICD-9-CM is available on CD-ROM from
the U.S. Government Printing Office. The FY 2008 version can be ordered
by contacting the Superintendent of Documents, U.S. Government Printing
Office, Department 50, Washington, DC 20402-9329, telephone number
(202) 512-1800. Questions concerning the ICD-9-CM should be directed to
Patricia E. Brooks, Co-Chairperson, ICD-9-CM Coordination and
Maintenance Committee, CMS, Center for Medicare Management, Hospital
and Ambulatory Policy Group, Division of Acute Care, Mailstop C4-08-06,
7500 Security Boulevard, Baltimore, Maryland 21244-1850.
Further information concerning the official version of the ICD-9-CM
can be found in the IPPS final rule with comment period, ``Changes to
Hospital Inpatient Prospective Payment System and Fiscal Year 2008
Rates'' in the August 22, 2007 Federal Register (72 FR 47130) and at
https://www.cms.hhs.gov/QuarterlyProviderUpdates/downloads/
cms1533fc.pdf.
Table 4 below lists the FY 2008 new ICD-9-CM diagnosis codes that
group to one of the 17 MS-DRGs for which the IPF PPS provides an
adjustment. This table is only a listing of FY 2008 changes and does
not reflect all of the currently valid and applicable ICD-9-CM codes
classified in the MS-DRGs. When coded as a principal code or diagnosis,
these codes receive the correlating MS-DRG adjustment.
Table 4.--FY 2008 New Diagnosis Codes
------------------------------------------------------------------------
Diagnosis code Description MS-DRG
------------------------------------------------------------------------
315.34............................. Speech and language 886
developmental delay
due to hearing loss.
331.5.............................. Idiopathic normal 056, 057
pressure
hydrocephalus (INPH).
------------------------------------------------------------------------
Since we do not plan to update the regression analysis until we
analyze IPF PPS data, the MS-DRG adjustment factors, shown in Table 5
below, will continue to be paid for RY 2009. Table 5 reflects the
changes that were made to the DRGs under the IPF PPS in a crosswalk of
DRGs prior to October 1, 2007 to the new MS-DRGs, which were effective
October 1, 2007.
[[Page 25716]]
Table 5.--FY 2008 Crosswalk of Current DRGs to New MS-DRGs Applicable for the Principal Diagnosis Adjustment
----------------------------------------------------------------------------------------------------------------
(v25) MS-DRG Adjustment
(v24) DRG prior to 10/01/07 after 10/01/07 MS-DRG descriptions factor
----------------------------------------------------------------------------------------------------------------
056 Degenerative nervous system ..............
disorders w MCC.
12......................................... 057 Degenerative nervous system 1.05
disorders w/o MCC.
080 Nontraumatic stupor & coma w MCC... ..............
023........................................ 081 Nontraumatic stupor & coma w/o MCC. 1.07
424........................................ 876 O.R. procedure w principal 1.22
diagnoses of mental illness.
425........................................ 880 Acute adjustment reaction & 1.05
psychosocial dysfunction.
426........................................ 881 Depressive neuroses................ 0.99
427........................................ 882 Neuroses except depressive......... 1.02
428........................................ 883 Disorders of personality & impulse 1.02
control.
429........................................ 884 Organic disturbances & mental 1.03
retardation.
430........................................ 885 Psychoses.......................... 1.00
431........................................ 886 Behavioral & developmental 0.99
disorders.
432........................................ 887 Other mental disorder diagnoses.... 0.92
433........................................ 894 Alcohol/drug abuse or dependence, 0.97
left AMA.
521........................................ 895 Alcohol/drug abuse or dependence w 1.02
rehabilitation therapy.
896 Alcohol/drug abuse or dependence w/ ..............
o rehabilitation therapy w MCC.
523........................................ 897 Alcohol/drug abuse or dependence w/ 0.88
o rehabilitation therapy w/o MCC.
----------------------------------------------------------------------------------------------------------------
2. Payment for Comorbid Conditions
The intent of the comorbidity adjustment is to recognize the
increased costs associated with comorbid conditions by providing
additional payments for certain concurrent medical or psychiatric
conditions that are expensive to treat. In the May 2007 IPF PPS update
notice (72 FR 25602), we explained that the IPF PPS includes 17
comorbidity categories and identified the new, revised and deleted ICD-
9-CM diagnosis codes that generate a comborbid condition payment
adjustment under the IPF PPS for RY 2008 (72 FR 25609-13).
Comorbidities are specific patient conditions that are secondary to
the patient's principal diagnosis, and that require treatment during
the stay. Diagnoses that relate to an earlier episode of care and have
no bearing on the current hospital stay are excluded and should not be
reported on IPF claims. Comorbid conditions must exist at the time of
admission or develop subsequently, and affect the treatment received,
affect the length of stay (LOS) or affect both treatment and LOS.
For each claim, an IPF may receive only one comorbidity adjustment
per comorbidity category, but it may receive an adjustment for more
than one comorbidity category. Billing instructions require that IPFs
must enter the full ICD-9-CM codes for up to 8 additional diagnoses if
they co-exist at the time of admission or develop subsequently.
The comorbidity adjustments were determined based on the regression
analysis using the diagnoses reported by hospitals in FY 2002. The
principal diagnoses were used to establish the DRG adjustment and were
not accounted for in establishing the comorbidity category adjustments,
except where ICD-9-CM ``code first'' instructions apply. As we
explained in the May 2007 IPF PPS notice (72 FR 25602), the code first
rule applies when a condition has both an underlying etiology and a
manifestation due to the underlying etiology. For these conditions, the
ICD-9-CM has a coding convention that requires the underlying
conditions to be sequenced first followed by the manifestation.
Whenever a combination exists, there is a ``use additional code'' note
at the etiology code and a ``code first'' note at the manifestation
code.
As discussed in the DRG section, it is our policy to maintain the
same diagnostic coding set for IPFs that is used under the IPPS for
providing the same psychiatric care. Although the ICD-9-CM code set has
been updated, the same adjustment factors have been in place since the
implementation of the IPF PPS. Table 6 below lists the FY 2008 new ICD
diagnosis codes that impact the comorbidity adjustments under the IPF
PPS. Table 6 is not a list of all currently valid ICD codes applicable
for the IPF PPS comorbidity adjustments.
Table 6.--FY 2008 New ICD Codes Applicable for the Comorbidity
Adjustments Diagnosis
------------------------------------------------------------------------
Comorbidity
Diagnosis code Description category
------------------------------------------------------------------------
040.41........................ Infant botulism....... Infectious
Diseases.
040.42........................ Wound botulism........ Infectious
Diseases.
058.10........................ Roseola infantum, Infectious
unspecified. Diseases.
058.11........................ Roseola infantum due Infectious
to human herpesvirus Diseases.
6.
058.12........................ Roseola infantum due Infectious
to human herpesvirus Diseases.
7.
058.21........................ Human herpesvirus 6 Infectious
encephalitis. Diseases.
058.29........................ Other human Infectious
herpesvirus Diseases.
encephalitis.
058.81........................ Human herpesvirus 6 Infectious
infection. Diseases.
058.82........................ Human herpesvirus 7 Infectious
infection. Diseases.
058.89........................ Other human Infectious
herpesvirus infection. Diseases.
200.30........................ Marginal zone Oncology
lymphoma, unspecified Treatment.
site, extranodal and
solid organ sites.
200.31........................ Marginal zone Oncology
lymphoma, lymph nodes Treatment.
of head, face, and
neck.
200.32........................ Marginal zone Oncology
lymphoma, Treatment.
intrathoracic lymph
nodes.
[[Page 25717]]
200.33........................ Marginal zone Oncology
lymphoma, Treatment.
intraabdominal lymph
nodes.
200.34........................ Marginal zone Oncology
lymphoma, lymph nodes Treatment.
of axilla and upper
limb.
200.35........................ Marginal zone Oncology
lymphoma, lymph nodes Treatment.
of inguinal region
and lower limb.
200.36........................ Marginal zone Oncology
lymphoma, intrapelvic Treatment.
lymph nodes.
200.37........................ Marginal zone Oncology
lymphoma, spleen. Treatment.
200.38........................ Marginal zone Oncology
lymphoma, lymph nodes Treatment.
of multiple sites.
200.40........................ Mantle cell lymphoma, Oncology
unspecified site, Treatment.
extranodal and solid
organ sites.
200.41........................ Mantle cell lymphoma, Oncology
lymph nodes of head, Treatment.
face, and neck.
200.42........................ Mantle cell lymphoma, Oncology
intrathoracic lymph Treatment.
nodes.
200.43........................ Mantle cell lymphoma, Oncology
intra-abdominal lymph Treatment.
nodes.
200.44........................ Mantle cell lymphoma, Oncology
lymph nodes of axilla Treatment.
and upper limb.
200.45........................ Mantle cell lymphoma, Oncology
lymph nodes of Treatment.
inguinal region and
lower limb.
200.46........................ Mantle cell lymphoma, Oncology
intrapelvic lymph Treatment.
nodes.
200.47........................ Mantle cell lymphoma, Oncology
spleen. Treatment.
200.48........................ Mantle cell lymphoma, Oncology
lymph nodes of Treatment.
multiple sites.
200.50........................ Primary central Oncology
nervous system Treatment.
lymphoma, unspecified
site, extranodal and
solid organ sites.
200.51........................ Primary central Oncology
nervous system Treatment.
lymphoma, lymph nodes
of head, face, and
neck.
200.52........................ Primary central Oncology
nervous system Treatment.
lymphoma,
intrathoracic lymph
nodes.
200.53........................ Primary central Oncology
nervous system Treatment.
lymphoma, intra-
abdominal lymph nodes.
200.54........................ Primary central Oncology
nervous system Treatment.
lymphoma, lymph nodes
of axilla and upper
limb.
200.55........................ Primary central Oncology
nervous system Treatment.
lymphoma, lymph nodes
of inguinal region
and lower limb.
200.56........................ Primary central Oncology
nervous system Treatment.
lymphoma, intrapelvic
lymph nodes.
200.57........................ Primary central Oncology
nervous system Treatment.
lymphoma, spleen.
200.58........................ Primary central Oncology
nervous system Treatment.
lymphoma, lymph nodes
of multiple sites.
200.60........................ Anaplastic large cell Oncology
lymphoma, unspecified Treatment.
site, extranodal and
solid organ sites.
200.61........................ Anaplastic large cell Oncology
lymphoma, lymph nodes Treatment.
of head, face, and
neck.
200.62........................ Anaplastic large cell Oncology
lymphoma, Treatment.
intrathoracic lymph
nodes.
200.63........................ Anaplastic large cell Oncology
lymphoma, intra- Treatment.
abdominal lymph nodes.
200.64........................ Anaplastic large cell Oncology
lymphoma, lymph nodes Treatment.
of axilla and upper
limb.
200.65........................ Anaplastic large cell Oncology
lymphoma, lymph nodes Treatment.
of inguinal region
and lower limb.
200.66........................ Anaplastic large cell Oncology
lymphoma, intrapelvic Treatment.
lymph nodes.
200.67........................ Anaplastic large cell Oncology
lymphoma, spleen. Treatment.
200.68........................ Anaplastic large cell Oncology
lymphoma, lymph nodes Treatment.
of multiple sites.
200.70........................ Large cell lymphoma, Oncology
unspecified site, Treatment.
extranodal and solid
organ sites.
200.71........................ Large cell lymphoma, Oncology
lymph nodes of head, Treatment.
face, and neck.
200.72........................ Large cell lymphoma, Oncology
intrathoracic lymph Treatment.
nodes.
200.73........................ Large cell lymphoma, Oncology
intra-abdominal lymph Treatment.
